Dynamics of Corporate Capital Structure Decisions: A Critical Survey of the Literature

Abstract

The researchers’ understandings on the relevance of corporate capital structure decisions have been shifted from the examination of the irrelevance argument to the relevance argument and its different facets. In the literature, the modern theories have overemphasized on the different “points of view” while their specific facets have their specific roles to play only. The researchers have deviated far away from one another and could not explain a lot. The quest for a unifying theoretical view whether possible or not has remained unaddressed as yet. In a dynamic time framework model, a firm’s financing decision may have financing flexibility in shifting its decision frameworks from one “point of view” framework to the other. Corporate financing decisions should include a super-set of decision variables rather than the segregated subsets simply. This paper shares the opinion that this direction of research may justify the theoretical and empirical gaps as well in the literature of the Corporate Finance.

Keywords: Corporate Capital Structures, Unifying View, Dynamic Frameworks, Literature Review.

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