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Optimal Capital Structure for Maximizing the Firm Value

Optimal Capital Structure for Maximizing the Firm Value

Rumeysa Bilgin
Copyright: © 2020 |Pages: 19
ISBN13: 9781799810865|ISBN10: 1799810860|ISBN13 Softcover: 9781799810872|EISBN13: 9781799810889
DOI: 10.4018/978-1-7998-1086-5.ch003
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MLA

Bilgin, Rumeysa. "Optimal Capital Structure for Maximizing the Firm Value." Valuation Challenges and Solutions in Contemporary Businesses, edited by Sinem Derindere Köseoğlu, IGI Global, 2020, pp. 41-59. https://doi.org/10.4018/978-1-7998-1086-5.ch003

APA

Bilgin, R. (2020). Optimal Capital Structure for Maximizing the Firm Value. In S. Köseoğlu (Ed.), Valuation Challenges and Solutions in Contemporary Businesses (pp. 41-59). IGI Global. https://doi.org/10.4018/978-1-7998-1086-5.ch003

Chicago

Bilgin, Rumeysa. "Optimal Capital Structure for Maximizing the Firm Value." In Valuation Challenges and Solutions in Contemporary Businesses, edited by Sinem Derindere Köseoğlu, 41-59. Hershey, PA: IGI Global, 2020. https://doi.org/10.4018/978-1-7998-1086-5.ch003

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Abstract

Capital structure decisions of management affect the value of a firm. This fact leads to the creation of an extremely rich capital structure literature over the last 60 years. This chapter explains main theories of capital structure and discusses the concept of target leverage which maximizes the firm value. The roles of tax payments, profitability, firm size, asset tangibility, growth opportunities, income volatility, and non-debt tax shields are examined as determinants of capital structure. The current status of capital structure research and some important empirical issues are discussed. Considerations for future research are presented.

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