Capital Structure and Corporate Financing Decisions
Theory, Evidence, and Practice
Published on 16. March 2011
504 pages
978-1-118-02292-4 (ISBN)
Description
A comprehensive guide to making better capital structure andcorporate financing decisions in today's dynamic businessenvironment
Given the dramatic changes that have recently occurred in theeconomy, the topic of capital structure and corporate financingdecisions is critically important. The fact is that firms need toconstantly revisit their portfolio of debt, equity, and hybridsecurities to finance assets, operations, and future growth.
Capital Structure and Corporate Financing Decisionsprovides an in-depth examination of critical capital structuretopics, including discussions of basic capital structurecomponents, key theories and practices, and practical applicationin an increasingly complex corporate world. Throughout, the bookemphasizes how a sound capital structure simultaneously minimizesthe firm's cost of capital and maximizes the value toshareholders.
* Offers a strategic focus that allows you to understand howfinancing decisions relates to a firm's overall corporatepolicy
* Consists of contributed chapters from both academics andexperienced professionals, offering a variety of perspectives and arich interplay of ideas
* Contains information from survey research describing actualfinancial practices of firms
This valuable resource takes a practical approach to capitalstructure by discussing why various theories make sense and howfirms use them to solve problems and create wealth. In the wake ofthe recent financial crisis, the insights found here are essentialto excelling in today's volatile business environment.
Given the dramatic changes that have recently occurred in theeconomy, the topic of capital structure and corporate financingdecisions is critically important. The fact is that firms need toconstantly revisit their portfolio of debt, equity, and hybridsecurities to finance assets, operations, and future growth.
Capital Structure and Corporate Financing Decisionsprovides an in-depth examination of critical capital structuretopics, including discussions of basic capital structurecomponents, key theories and practices, and practical applicationin an increasingly complex corporate world. Throughout, the bookemphasizes how a sound capital structure simultaneously minimizesthe firm's cost of capital and maximizes the value toshareholders.
* Offers a strategic focus that allows you to understand howfinancing decisions relates to a firm's overall corporatepolicy
* Consists of contributed chapters from both academics andexperienced professionals, offering a variety of perspectives and arich interplay of ideas
* Contains information from survey research describing actualfinancial practices of firms
This valuable resource takes a practical approach to capitalstructure by discussing why various theories make sense and howfirms use them to solve problems and create wealth. In the wake ofthe recent financial crisis, the insights found here are essentialto excelling in today's volatile business environment.
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H. Kent Baker | Gerald S. Martin
Capital Structure and Corporate Financing Decisions
Theory, Evidence, and Practice
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Persons
H. KENT BAKER, PhD, CFA, CMA, is University Professor ofFinance and Kogod Research Professor at the Kogod School ofBusiness at American University, Washington, D.C. He has publishedextensively in leading academic and professional finance journalsincluding the Journal of Finance, Journal of Financialand Quantitative Analysis, Financial Management,Financial Analysts Journal, and Journal of PortfolioManagement. Recognized as one of the most prolific authors infinance during the past fifty years, Professor Baker has consultingand training experience with more than 100 organizations and hasbeen listed in fifteen biographies.
GERALD S. MARTIN, PhD, is an Associate Professor ofFinance at the Kogod School of Business at American University,Washington, D.C. He has published in top scholarly journals,including the Journal of Financial Economics and Journalof Financial and Quantitative Analysis. Before embarking on hisacademic career, Professor Martin spent seventeen years in theprivate sector as president and CEO of TMI Aircraft Finance/TMILeasing, LLC, financing aircraft and aviation products worldwidefor Textron Financial Corporation, as well as in marketing andresearch at Bell Helicopter Textron Inc.
GERALD S. MARTIN, PhD, is an Associate Professor ofFinance at the Kogod School of Business at American University,Washington, D.C. He has published in top scholarly journals,including the Journal of Financial Economics and Journalof Financial and Quantitative Analysis. Before embarking on hisacademic career, Professor Martin spent seventeen years in theprivate sector as president and CEO of TMI Aircraft Finance/TMILeasing, LLC, financing aircraft and aviation products worldwidefor Textron Financial Corporation, as well as in marketing andresearch at Bell Helicopter Textron Inc.
Content
Acknowledgments ix
1 Capital Structure: An Overview 1
H. Kent Baker and Gerald S. Martin
PART I The Elements of Capital Structure 15
2 Factors Affecting Capital Structure Decisions 17
Wolfgang Bessler, Wolfgang Drobetz, and Robin Kazemieh
3 Capital Structure and Corporate Strategy 41
Maurizio La Rocca
4 Capital Structure and Firm Risk 59
Valentin Dimitrov
5 Capital Structure and Returns 75
Yaz Gulnur Muradoglu and Sheeja Sivaprasad
6 Capital Structure and Compensation 93
Alan Victor Scott Douglas
7 Worldwide Patterns in Capital Structure 111
Carmen Cotei and Joseph Farhat
PART II Capital Structure Choice 127
8 Capital Structure Theories and Empirical Tests: An Overview129
Stein Frydenberg
9 Capital Structure Irrelevance: TheModigliani-Miller Model151
Sergei V. Cheremushkin
10 Trade-Off, Pecking Order, Signaling, and Market Timing Models171
Anton Miglo
11 Estimating Capital Costs: Practical Implementation ofTheory's Insights 191
Robert M. Conroy and Robert S. Harris
12 Economic, Regulatory, and Industry Effects on CapitalStructure 211
Paroma Sanyal
13 Survey Evidence on Financing Decisions and Cost of Capital229
Franck Bancel and Usha R. Mittoo
14 Survey Evidence on Capital Structure: Non-U.S. Evidence249
Abe de Jong and Patrick Verwijmeren
PART III Raising Capital 261
15 The Roles of Financial Intermediaries in Raising Capital263
Neal Galpin and Heungju Park
16 Bank Relationships and Collateralization 281
Aron A. Gottesman and Gordon S. Roberts
17 Rating Agencies and Credit Insurance 299
John Patrick Hunt
18 Secured Financing 319
Hugh Marble III
19 Sale and Leasebacks 335
Kyle S. Wells
PART IV Special Topics 351
20 Financial Distress and Bankruptcy 353
Kimberly J. Cornaggia
21 Fiduciary Responsibility and Financial Distress 371
Remus D. Valsan and Moin A. Yahya
22 The Lease versus Buy Decision 387
Sris Chatterjee and An Yan
23 Private Investment in Public Equity 401
William K. Sjostrom Jr.
24 Financing CorporateMergers and Acquisitions 419
Wolfgang Bessler, Wolfgang Drobetz, and Jan Zimmermann
Answers to Chapter Discussion Questions 445
Index 475
1 Capital Structure: An Overview 1
H. Kent Baker and Gerald S. Martin
PART I The Elements of Capital Structure 15
2 Factors Affecting Capital Structure Decisions 17
Wolfgang Bessler, Wolfgang Drobetz, and Robin Kazemieh
3 Capital Structure and Corporate Strategy 41
Maurizio La Rocca
4 Capital Structure and Firm Risk 59
Valentin Dimitrov
5 Capital Structure and Returns 75
Yaz Gulnur Muradoglu and Sheeja Sivaprasad
6 Capital Structure and Compensation 93
Alan Victor Scott Douglas
7 Worldwide Patterns in Capital Structure 111
Carmen Cotei and Joseph Farhat
PART II Capital Structure Choice 127
8 Capital Structure Theories and Empirical Tests: An Overview129
Stein Frydenberg
9 Capital Structure Irrelevance: TheModigliani-Miller Model151
Sergei V. Cheremushkin
10 Trade-Off, Pecking Order, Signaling, and Market Timing Models171
Anton Miglo
11 Estimating Capital Costs: Practical Implementation ofTheory's Insights 191
Robert M. Conroy and Robert S. Harris
12 Economic, Regulatory, and Industry Effects on CapitalStructure 211
Paroma Sanyal
13 Survey Evidence on Financing Decisions and Cost of Capital229
Franck Bancel and Usha R. Mittoo
14 Survey Evidence on Capital Structure: Non-U.S. Evidence249
Abe de Jong and Patrick Verwijmeren
PART III Raising Capital 261
15 The Roles of Financial Intermediaries in Raising Capital263
Neal Galpin and Heungju Park
16 Bank Relationships and Collateralization 281
Aron A. Gottesman and Gordon S. Roberts
17 Rating Agencies and Credit Insurance 299
John Patrick Hunt
18 Secured Financing 319
Hugh Marble III
19 Sale and Leasebacks 335
Kyle S. Wells
PART IV Special Topics 351
20 Financial Distress and Bankruptcy 353
Kimberly J. Cornaggia
21 Fiduciary Responsibility and Financial Distress 371
Remus D. Valsan and Moin A. Yahya
22 The Lease versus Buy Decision 387
Sris Chatterjee and An Yan
23 Private Investment in Public Equity 401
William K. Sjostrom Jr.
24 Financing CorporateMergers and Acquisitions 419
Wolfgang Bessler, Wolfgang Drobetz, and Jan Zimmermann
Answers to Chapter Discussion Questions 445
Index 475
