Trade-off theory, pecking order theory and market timing theory: a comprehensive review of capital structure theories

Agha Jahanzeb

Economics Bulletin, 2013, vol. 33, issue 1, A6

Abstract: This study examines the role of different capital structure theories in decision making regarding the debt preferences. The study includes the seminal work of Modigliani and Miller (1958) which was a novel study of its kind in the field of capital structure. Purpose of this study is to look into the three theories; Trade-Off Theory, Pecking Order Theory and Market Timing Theory. Literature shows that the two theories i-e; Trade-Off and Pecking Order have always dominated the capital structure decisions but recent theoretical and empirical work shows that Market Timing Theory has also challenged the basic theories as managers are always keen to take advantage of “market timing”.

JEL-codes: G3 (search for similar items in EconPapers)
Date: 2013-02-21
References: Add references at CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
http://www.accessecon.com/pubs/EB/2013/Volume33/EB-13-V33-I1-A6.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-13-00118

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().