Capital Structure Theory

Ser-Huang Poon

Chapter 8 in Advanced Finance Theories, 2018, pp 101-128 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter follows materials in Merton (1990, Chapters 11 and 12, and part of the discussions in Chapter 13). These are combined with some modern techniques for pricing contingent claims and some new materials in Leland (1994) concerning bankruptcy cost and tax effect on capital structure. Some new debt instruments proposed after the 2008 financial crisis to help solve the problem of debt overhang are also discussed in this chapter.

Keywords: Intertemporal Portfolio Selection; Capital Structure; General Equilibrium; Spanning; Mutual Fund Theorem; Jumps; Incomplete Markets (search for similar items in EconPapers)
JEL-codes: G30 (search for similar items in EconPapers)
Date: 2018
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