Academic journal article Competition Forum

Capital Structure in the Trade of Mexico: Main Factors Influencing the Debt Inclusion

Academic journal article Competition Forum

Capital Structure in the Trade of Mexico: Main Factors Influencing the Debt Inclusion

Article excerpt

INTRODUCTION

The research, is motivated because of the absence of policies, rules or models into the real life of the enterprises to generate their own capital structure, implying the reviewing of theories, the empirical studies, the existing hypotheses, the major postulates, to determine their (ProQuest: Deletions shown by "strike-through" in the original text are omitted.) mathematical relationship between debt and the capital structure. Thus, we established a solid foundation to the problem, the questioning and the established objectives. The studies of the capital structure in Mexi co are fundamental, because the lack of a robust model to explain the financial decisions in the Mexican organizations, particularly in the commerce companies sector, justify this research.

THEORETICAL FRAMEWORK

The existence or not of an optimal capital structure for the companies, as well the way it should be determined, has been one of the most controversial topics of financial literature since Modigliani and Miller (1958), published their article and sho wed their propositions of the irrelevance of the capital structure to the value of the enterprise. It has been 54 years since the publication of the seminal work that gave origin to corporate finances as we know nowadays and at the same time caused that capital structures studies caught so much attention from the economy and financial areas. However, the broad research done on the capital structure theory, to this day, is no conclusive in answers. The theoretical models developed during the last years, have tried since to validate and generalize sometimes, the thesis of the irrelevance of Modigliani and Miller (1958); other times, the models have been tried to adjust the thesis of maximum indebtedness of Modigliani and Miller (1963). From the convergence of both lines of research on the decade of the 60's emerged a renovated theory of the capital structure postulating the existence of an optimal structure to the proposed problem. In this research were reviewed the following theories: optimal capital structure, Theory of the Fiscal Tax Base, Theory of the Asymmetric Information, The Theory of the Agency Costs, The Free Cash Flow Theory, The Pecking Order Theory (POT); This last theory was formally proposed by Myers (1984), based in the preliminary work of Donaldson (1961).

The empirical studies that support all the above mentioned theories, were also reviewed, highlighting among others, the studies done by Rajan and Zingales (1995), and the study of Wald (1999), these studies offered empirical evidence for G -7 countries. They were analyzed some institutional factors of the company, such as: The total assets (size of the firm), profit, sales (growth rate), and the capital (risk).

In the empirical studies, as well as the financial theories, the knowledge has increased and evolved; however, in the different researches done hasn't been achieved the construction of a model that includes jointly all the factors considered capital structure determinants, among the published investigations, we can mention the ones made Filbeck and Gorman (2000), Bradley, Chung (1993), Van el Der (1989), Kester (1986), and Harrel and Kim (1984).

The empirical evidence suggests that besides the specific factors of the company also the macroeconomic factors o r institutionals of each country are important of the capital structure (Booth, Aivazian, Demirguc-Kunt, & Maksimovic, 2001; Antoniou, & Paudyal, 2008; Gaytan & Bonales, 2009; Dias, Thosiro, & Cruz, (2009; Dias & Toshiro, 2009). Nevertheless, the most part of the theoretical debate and empirical about the incorporation of the debt in the capital structure, has staye d conditioned by well-developed the capital markets and with a financial architecture well structured (Singales, 2000).

Arias, M., Arias, L., Pelayo and Cobián (2009), argued that is necessary to do an specialized research about this matter in the Mexican companies with the purpose of achieving a better understanding about their contracting and debt decisions, in order to design financial instruments adequate to their financial needs and to facilitate and support their growth. …

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