Trend Capital Structure
Trend Capital Structure
Introduction
Money is the root of all progress. In academic and professional jargon, But it is financial. Different levels of financial corporate finance, This will include personal banking and public finance. Other cross-level, the term 'Finance' is used in the three senses. First, it indicates that money. Second, it promises to meet the contract says. Third, it This means that lack of money and promises of money, goods and services is To minimize the costs due to increases based on the available financial Can be sold at the price. The concept of time and financial transaction services Money, and the risks are and how they mutually. Finance The price of capital, acquisitions, and should be carefully evaluated for future use Because you can do. We can describe the work of the Finance : (A), (2) has acquired the financial resources, (iii) the economic activity for Expected to allocate funds to the financial requirements will consist of three kinds. So It is widely described as the science of money management.
The concept of structural capital
The capacity of the company Based on the availability of funds to operate its activities. Generally Finance literature, but these funds as owners (shareholders to contribute to Long-term funding) and an outsider. Owners' equity contributions to fund Is represented by financial resources generated internally. Fund A unique feature of procurement is that the company and the source Thus, the combination of long-term funding source for the different tapping financial The capital structure literature is termed. Capital structure that is generally proportional to Means that the total capital of the company's debt and equity have been. Results from 'Capital structure, long-term financing refers to capital and debt structure And may be defined as the ratio of capital. In addition, the capital, easily As the difference between assets and liabilities through fiscal, and comprehended, so that Residual difference between debt and equity that is always displayed.
Capital structure Can be defined in many ways. In the U.S., long-term debt Is defined as the ratio. BRIC countries, such as companies in emerging countries Both, as well as one's financial assets to their current assets As for short-term debt financing as well as the long term.
It is also the country's long-term normal startup companies Debt and short-term debt to roll over short-term debt Replace. Therefore, it is more appropriate to the context of economic development Mainly, the capital structure is to define the ratio of total debt is.
Capital Structure Analysis
Capital structure analysis of the domain Owners often 'capital and debt capital represent the relationship between Structure is provided through the utilization. Capital structure analysis of key ratios Net worth ratio debt – capital ratio, total debt – capital ratio and the debt Are included. Debt – capital ratio of capital to long-term debt by Is determined by dividing. Total debt to equity ratio of shareholders' Share responsibility for funding long-term debt plus short term Is calculated by. Net worth ratio of debt to shareholders' liabilities Is determined by dividing long-term funding. In fact, these structural Utilization ratio is also called the gearing ratio is the capital. It is also important to 'The capital structure consists of the analysis, Often the term, is the means to pay attention and is widely used.
Theory Development
Many of the researchers on the financial Many theories and the development of common endogenous and exogenous environment, capital structure Based. Study documents the current study, only the generalization of the current topic Relevant
Actively take advantage of the company's values (Harris & Raviv (1990a), Stulz (1990), Hirshleifer (1964). And they basically take advantage of the positive Odds with each other (Harris and Raviv is a (1990a). Growth opportunities (Jensen and Meckling (1976), and take advantage of the lack of growth, Stulz (1990). Reduced profitability and increased utilization (Jean (1987). Utilization increases with the range regulated and Meckling (1976), Stulz (1990). Utilize free Improve cash flow, and (Jensen (1986), increased Stulz (1990). Utilized to the expansion of Liquidation value added Williamson (1988), Harris and Raviv 1990a). Bonds, the "Assets Alternative "(Jensen & Meckling 1976) may be possible to prevent the contract Can.
Pessimistically leverage and cash flow interest coverage ratio And an increase in the unobservable part of the base (Harris and Raviv (1990a). Leverage Is associated with the possibility of restructuring (the window (l987) to the degree Improved utilization reduction in which the company acquired the target and Prevention (Stulz (1990), Hirshleifer (1964) is the lack of.
Track record in business and more (Diamond (1989) is a low possibility of escape. Use Test Cost (the scope and Harris and Raviv (1990a). Utilized to increase the reduction in Increases and is not a monopoly of some products (Titman, 1984)-only service Does not need.
Products, communications plan Products and take advantage of much improved (Maksimovic (1988) Based on the demand and the supple Brander & Lewis (1986). Leverage increases.'s Scope and utilization Increasing market (the product quality is not important to the state (ie, Maksimovic and Titman (elapsed).
Approach Capital structure decisions
A variety of market failures capital structure In the realization of the theory of Mrs. MM have led to the hypothesis. In fact, these Towards the theory of capital structure decisions, or will be moved to the strategy. Debt, Or the most favorable market conditions, capital structure, risk level, This theory centers on management attitudes. The main theories of capital structure decisions Include (a) trade – off the theory, (ii) The theory of ordering a full row (3) agency cost theory. (4) infringement theory of management, and (4) Market Timing theory.
(A) trade – off the theory:
Some Defects lead to the optimal trade-offs are as follows. Higher taxes on dividends, debt (Modigliani and Miller (1963) and Miller and Scholes (1978)). Display a high non-debt tax shield Shares representing less debt (DeAngelo and financial structure Masulis (1980)). Represents a high cost.
Little, senior debt of insolvent Administrators have the benefit of investment opportunities (Myers (1977)). Agency The problem is more or less debt can be called for May be forced to give up. Free cash flow and too much value Interest between managers and shareholders of the discrepancy (Jensen (1986)) as Can lead to.
Go to more debt and asset managers bondholders (the difference of opinion on alternative and this can lead to Fama and Miller (1972) and Jensen and Meckling (1976)). Harris and Raviv (1991) survey and the best of these Capital structure, other possible influences.
(2) Order theory's right there:
Myres (1984) pecking order According to the theory, the best capital structure. Precisely, There is the most lucrative levels, the cost of deviating from it In order to increase the cost of external finance, unlike irrelevant.
I know this because investors outside of the financial Sources rely on costly than outside investors relations manager For more information about the company's outlook is because it has. In Myers and Majluf the (1984), external investors sensibly Company's share price when the debts instead of a discount riskless asset managers issued.
(3) infringement theory of management:
Assuming that the dynamic Capital Structure Management based on infringement of Zwiebel (1996), highly valued and There's a good investment opportunity, equity financing, but easily the same The situation is deeply rooted in the manager to be. They then Imbalance in the obligations established in the future periods may reject.
When managers do not appreciate the stakes in the future imbalance After floating the real meaning of it, but with market timing Analysis is very unusual. Manager does not try to make The use of new investors, rather, their hand to investors Use (Booth et al, 2001) by not re-occupations will be published.
Both views are valid. Share issue and the survey In particular, evidence and proof of earnings management and long-term returns, but View first gain support repurchases.
(4) market timing theory :
The theory of capital structure, equity markets of the past efforts Time to develop as a result of the growing significance. The stock market Timing and capital structure, leading to a similar twofold Is dynamics.
Myers and Majluf's first dynamic type (1984), managers and investors with a reasonable cost of adverse selection Across its diverse businesses, or over time. Lucas and McDonald (1990) and Korajczyk, Lucas, and McDonald (1992) time.Consistent throughout this Stories, Korajczyk et al studied the eggs depends adverse selection (1991) The release of corporate information, the following equity issues tend to be announced Can be found can reduce the information asymmetry.
(V) the agency cost theory:
Long back, Adam Smith (1776) Holiday: "Directors of these [stock] companies, however, rather different People's money than their own, it can not be expected to know the manager, They should watch over it with a certain individual members of the same anxiety With partners often keep their wake.
Delegates of the rich, as For what they think of their owner's attention to small problems As a tribute, but it is very easy to ask yourself about From having to provide indulgence. Careless and the richness, and therefore Always need to win more or less, management of these companies Task. "
Agency cost theory in the sense of Adam Smith Observation is premised on the company's managers and shareholders' interests fully Are not aligned. Their seminal paper, Jensen and Meckling (1976) shares Separation of ownership and corporate control of the agency costs arising from Stressed the importance of the value of the company took a non-administrator of his Tend to maximize utility. These conflicts Investment managers as part of the risk of excessive risk taking moves Have incentives to strategic situations can occur.
This is the same as Jensen (1986, Korea 323),''Jensen stated the difficulty of (1986) 'free cash flow theory, "what leads us to The administrator or the organization's cost of capital is relatively inefficient in the And below it a waste to invest in is an inspiration to pour more cash. "
Thus, the growing risk of debt liquidation calibration device (Grossman and Hart, 1982) or through the process of service in the armed forces (Jensen debt to cash flow, cash flow, reduce waste production and management You can use for 1986). In these circumstances, debt The value of the company will have a positive impact on.
Organ Costs in the crash of the current owner of the debt and equity investors You can. When these changes occur in non-payment risk. Default risk which Myers (1977),''of the underinvestment "or''of Also known as debt overhang "can be created is not a problem. 2 If the value of debt the company will have a negative impact on.
Conclusion:
Until the early '90s, companies in India Financial management and the peaceful monotony, acted accordingly. Liberalization of Disease, privatization and globalization and financial sector reform, the need to change Flexible and dynamic activities, mild activity. Corporate Finance The administrator can choose from a range of financial instruments today. They Now people can freely price or less. They Book building is open is the process of IPOs. They are a global financial You can access the market. They are violent, and financial intermediaries, Institutional processes. They are interested in and volatility of exchange Rate exposure. The capital structure of their decision not to take it seriously Bloodthirsty view of the financial markets about their credit rating I was afraid. All of these challenges for enterprise administrators have been 1992 issue of capital controls and the removal of the introduction of share price problems Results.
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