Capital Structure and Corporate Financing Decisions: Theory, Evidence, and Practice

Given the dramatic changes that have occurred recently in the economy, the topic of capital structure and corporate financing decisions is critically important. The purpose of this book is to provide an in-depth examination of critical capital structure topics. The coverage extends from discussing basic components and existing theories to their application to increasingly complex and real-world situations. Throughout, the book emphasizes how a sound capital structure simultaneously minimizes the firms cost of capital and maximizes the value to shareholders. The book takes a practical approach to capital structure by discussing why various theories make sense, the empirical support for them, and how firms use these theories to solve problems and to create wealth. This volume tries to avoid theoretical and mathematical derivations, which tend to be tedious for the reader.  Although the book also reports the results of many empirical studies that link theory and practice, the objective is to distill them to their essential content so that they are understandable to the reader. The book has five other distinguishing features. First, the book contains contributions from about 50 authors, given that most chapters will be co-authored. Thus, the breadth of contributors provides a wide range of viewpoints and a rich interplay of ideas. Second, the book offers a strategic focus so that readers can understand how the financing decision relates to a firms overall corporate policy and strategy. Because financial decisions are interconnected, managers must incorporate them into the overall corporate strategy of the firm. Third, the book emphasizes the principal-agency relationship among the various constituents of the firm. Fourth, this volume takes both a prescriptive and descriptive perspective. Using a prescriptive approach, it examines how corporate managers should make financial decisions to improve firm value. The books descriptive perspective discusses theories that shed light on which financial decisions managers make and analyzes the impact of these decisions in financial markets. The book also provides results from survey research describing actual financial practices of firms. Fifth, at the end of each chapter, there are four to six discussion questions that help to reinforce key aspects of the chapters content.