Capital Structure in the Modern World

This book focuses on microeconomic foundations of capital structure theory. It combines theoretical results with a large number of examples, exercises and applications. The book examines fundamental ideas in capital structure management, some of which are still not very well understood in the business community, such as Modigliani and Miller s irrelevance result, trade-off theory, pecking-order theory, asset substitution, credit rationing and debt overhang. The second edition also covers capital structure issues related to recent developments in financial technology including crowdfunding and token issues and discusses significant differences between these innovative ways of firm financing compared to traditional debt and equity. Chapters also discuss the ways in which financial economists were forced to look critically at capital structure after the financial crisis of 2007-2009 and the COVID-19 pandemic, as the problems faced by many companies stemmed from their financing policies. Further the book analyzes links between capital structure and firm s performance, corporate governance, firm s strategy and flexibility, and covers such topics as life cycle approach to capital structure management, capital structure of small and start-up companies, corporate financing versus project financing and examples of optimal capital structure analyses for different companies. This comprehensive guide to capital structure theory will be of interest to all students, academics and practitioners seeking to understand this fast-developing and critical area.

Section 1: Basic Capital Structure Ideas. - Chapter 1: Introduction. - Chapter 2: Modigliani-Miller Proposition and Trade-off Theory. - Chapter 3: Asymmetric Information and Capital Structure. - Chapter 4: Credit Rationing and Asset Substitution. - Chapter 5: Debt Overhang. - Chapter 6: Capital Structure, Behavioural Finance and Incomplete Contracts. - Section 2. Advanced Topics. - Chapter 7: Capital Structure Choice and Firm s Quality . - Chapter 8: Capital Structure and Corporate Governance. - Chapter 9: Capital Structure of Start-Up Firms and Small Firms. - Chapter 10: Corporate Capital Structure vs. Project Financing. - Chapter 11: Security Design and Financing Innovations. - Chapter 12: Capital Structure and FinTech Developments. - Chapter 13: Capital Structure Ana-lysis: Some Examples. - Chapter 14: Capital Structure Theory Applications in Non-Traditional Areas.