capital structure

(redirected from Capital structure theory)

Capital structure

The makeup of the liabilities and stockholders' equity side of the balance sheet, especially the ratio of debt to equity and the mixture of short and long maturities.

Capital Structure

How a company finances its operations. The three most basic ways to finance are through debt, equity (or the issue of stock), and, for a small business, personal savings. Capital structure usually refers to how much of each type of financing a company holds as a percentage of all its financing. Generally speaking, a company with a high level of debt compared to equity is thought to carry higher risk, though some analysts do not believe that capital structure matters to risk or profitability.

capital structure

capital structure

the composition of a JOINT-STOCK COMPANY'S long-term capital which reflects the source of that capital, for example SHARE CAPITAL and long-term LOAN CAPITAL. See CAPITAL GEARING.

capital structure

See capital stack.
References in periodicals archive ?
Do tests of capital structure theory mean what they say?
(2017), "Capital structure theory: reconsidered", Research in International Business and Finance, Vol.
Since the mid-1970s, capital structure theory has become even more sophisticated in its explanation of why various financing regimes exist in the corporate sector.
Modern capital structure theory evolved from the revolutionary paper of Modigliani and Miller (M&M) published in 1958.
There are a number of questions to consider, starting with: Is the current optimal capital structure theory and knowledge deficient so that theoretical advancements are suspect and prescriptions for practice are faulty?
Nevertheless, despite the extensive research that has been conducted on capital structure theory, to this day, no conclusive answers have been drawn.
Awan and Amin (2014) investigate which factors affect which of 68 textile firms of Pakistan listed on Karachi Stock Exchange during 2006-2012 and which type of capital structure theory does more prevail in textile sector of Pakistan.
However, extended investigations of capital structure theory have not provided answers.
Knowledge of capital structure theory and practice is important in stock repurchase programs.
Cross-sectional regressions of debt ratios suggest that observed postemergence capital structures are only partially consistent with the predictions of the static trade-off capital structure theory. Moreover, unlike Gilson, we find that post-reorganization debt ratios are positively related to pre-reorganization debt ratios, suggesting that the debt is sticky.
Because there may exist more than one proxy for the latent attributes specified by capital structure theory as determinants of capital structure, equation (6) implies that these proxies can be expressed as linear function of one or more latent attributes plus a random measurement error.