The Capital Structure Paradigm: Evolution of Debt/Equity Choices

The Capital Structure Paradigm: Evolution of Debt/Equity Choices

The Capital Structure Paradigm: Evolution of Debt/Equity Choices

The Capital Structure Paradigm: Evolution of Debt/Equity Choices

Synopsis

Beginning with a simple model of the debt/equity impact upon firm value and progressively adding complexity to this model, this book seeks to answer the question, "What is the frontier of knowledge with respect to debt/equity alternatives, and could a major paradigm shift affect debt/equity choices?"

Excerpt

Central Tenet: The analysis of paradigm shifts provides a worth
while means of thinking about capital structure decision making.

STATEMENT OF PURPOSE

This book presents the current thinking about how to determine the mix of financing sources for a modern business entity. The book is designed to appeal to three audiences: (1) academic research community, (2) business school students, and (3) business professionals. In general, the capital structure decision includes the mix of private and public securities, the mix of short-term and long-term securities, as well as a mix of debt and equity securities. In this book we focus on the last issue, namely, the mix of debt and equity.

We describe in this book the evolution of the firm debt/equity paradigm from the initial foundations to the present time. We follow the evolution of the paradigm through two stages: (1) identification of the individual factors that affect the firm’s debt/equity position and (2) development of a synthesizing framework that includes the dynamics of interactions among the factors. Then the book looks forward from . . .

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