New Mechanism of Formation of the Company Optimal Capital Structure, Different from Suggested by Trade-off Theory

Peter Brusov, Tatiana Filatova and Natali Orekhova
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Tatiana Filatova: Financial University under the Government of Russian Federation
Natali Orekhova: Financial University under the Government of Russian Federation

Chapter Chapter 6 in The Brusov–Filatova–Orekhova Theory of Capital Structure, 2023, pp 119-138 from Springer

Abstract: Abstract Under condition of proved by us insolvency of well-known classical trade-off theory question of finding of new mechanisms of formation of the company optimal capital structure, different from one, suggested by trade-off theory, becomes very important. One of the real such mechanisms has been developed by us in this Chapter. It is based on the decrease of debt cost with leverage, which is determined by growth of debt volume. This mechanism is absent in perpetuity Modigliani–Miller theory, even in modified version, developed by us, and exists within more general modern theory of capital cost and capital structure by Brusov–Filatova–Orekhova (BFO theory).

Keywords: Brusov–Filatova–Orekhova (BFO) theory; Trade-off theory; The weighted average cost of capital; Equity cost; Company capitalization; A new mechanism; Optimal capital structure (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-27929-4_6

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DOI: 10.1007/978-3-031-27929-4_6

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