Title: A New Capital Structure Theory: The Four-Factor Model
Abstract: This article presents a new capital structure model based on four factors well documented in literature: asymmetric information, taxes, bankruptcy costs and decision-makers' overconfidence. The model can simultaneously explain several facts about capital structure including those that remain puzzling from existing theories point of view eg. negative correlation between debt and profitability; why firms issue equity etc. Unlike many advanced research on capital structure, a closed-form solution is obtained for most results.
Publication Year: 2020
Publication Date: 2020-03-27
Language: en
Type: article
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