定稿11财一中英文

1、OptimalCapitalStructure:ReflectionsoneconomicandotherByMarcSchauten&JaapDespiteavastliteratureonthecapitalstructureofthefirm(seeHarrisandRaviv,1991, Graham and Harvey, 2001, Brav et al., OptimalCapitalStructure:ReflectionsoneconomicandotherByMarcSchauten&JaapDespiteavastliteratureonthecapitalstructu

2、reofthefirm(seeHarrisandRaviv,1991, Graham and Harvey, 2001, Brav et al., 2005, for overviews) there still is a big n theory and practice (see e.g. Cools, 1993, Tempelaar, 1991, Boot & 1997). Starting with the seminal work by Modigliani & Miller (1958, 1963), much attention has been paid to the opti

3、mality of capital structure from the of Over the last few decades studies have been produced on the effect of erests on capital structure. Well-known les are erests customers who receive product or service guarantees from the company (see Grinblatt&Titman,2002).Anothersreceivedconsiderableattentioni

4、srelationn managerial incentives and capital structure (Ibid.). Furthermore, ie of corporate control2 (see Jensen & Ruback, 1983) and, related, the e ernance3(seeShleifer&Vishney,1997),receivealionspartoftherecentacademicattentionforcapitalstructureFrom all these studies, one thing is clear: The cap

5、ital structure deci rather, the management of the capital structure over time) involves more iizationofthefirmsmarketvaluehisr,wegiveanof the different objectives and considerations We make a distinction betn two broadlyvebeenheis defined situations. traditionalcase of the t strives for ization of t

6、he value of the for the current shareholders. Whenever other n enter capital structure s, these considerations have to be instrumental to goalofization.Thesecondcaseconcernsthetexplicitlyfor more objectives shareholders adopt a ownership structuren ization alone. This may be because multiple stakeho

7、lders approach or because of a different n the usual corporate structure dominating finance An leof the latter is the co-operation, a legal entity which can be found in manyEuropeancountries.Foraonwhyfirmsarefacingmultiplegoals,refertoHallerbachandSpronk(2002a,In Section 2 we will describe objective

8、s and t, directly indirectly,clearlyhelptocreateandain a capitalstructure which is optimalthe izing firm. The third section describes other objectives considerations. Some of these may have a clear negative effect on economic value, others may be neutral and in some cases the effect on economic valu

9、e is not yclear.Section4shows how,forbothcases,capitalstructures beframedasmultiplecriteriaproblemswhichcanthenbenefitfromcriteriasupporttarenow widely izingshareholderAccording to the neoclassical view on the role of the firm, the firm has one sessthepropertyof the firm and are thus entitled to sha

10、reholders only have one objectivedecide what the firm should aim for. ind - ization - the goal of firm ization of the contribution to the l wealth of shareholders. The firm plish this by investing of the firm and are thus entitled to shareholders only have one objectivedecide what the firm should ai

11、m for. ind - ization - the goal of firm ization of the contribution to the l wealth of shareholders. The firm plish this by investing in projects itive present value4. Part of shareholder value is determined by the corporate 5.Twotheoriesaboutthecapitalstructureofthefirm-thetrade-offtheorythe peckin

12、g order theory - me shareholder ization as the one onlycorporateobjective.Wewilldiscussboththeoriesincludingseveralmarketrelated s. Based on this we formulate a list of criteriat is his essentially neoclassical view.relevantforthecorporatefinancingThe original ition I of Miller and Modigliani (1958)

13、 t in a capital market the equilibrium market value of a firm is independent of its structure, i.e. the debt-equity ratio6. If ition I does not hold then arbitrage take place. Investors will buy shares of the undervalued firm and sell shares of overvalued shares in such a t e streams are obtained. i

14、nvestors exploit these arbitrage opportunities, the price of the overvalued shares falltoftheundervaluedshares willrise,until bothareWhen corporate taxes roduced, ition I changes dramatically. Miller Modigliani (1958, 1963) t in a worldwith corporate tax the value of firms a.o. a function of leverag

15、e. erest e tax deductible and izes firm payments to shareholders are not, the capital t dredpercentdebtfinancing.Byincreasingleverage,thepaymentstoernmentarereducedhighercashflowfortheprovidersofcapitalasaThedifference n the present value of the taxes paid by an unlevered firm (G uandanidentical lev

16、eredfirm(G)isthepresentvalue oftaxshieldslhe traditional trade-off s of optimal capital structure it is tfirmsbalancethemarginalpresentvalueeresttaxshields8againstmarginaldirect ruptcy costs.9 Additional factors can costs of l distress or direct histrade-ramework.Otherndirectcostsoflareagency costs

17、of debt (Jensen & Meckling, 1976). Often cited les of costs of debt are the underinvestment problem (Myers, 1977)10, the asset substitution problem (Jensen & Meckling, 1976 and Galai & Masulis, 1976), the play for time gamebymanagers,theunexpectedincreaseofleverage(combinedwi nequivalent pay out to

18、stockholders to make to increase the impact), the refusal to contribute equity capital and the cash in and run game (Brealey, Myers & Allan, 2006). problemsarecausedbythedifferenceerestnequityanddebtholderscouldbeseenaspartoftheindirectcostsofldistress.Anotherbenefitofis the reduction of agency cost

19、s n managers and external equity (Jensen Meckling, 1976, Jensen, 1986, 1989). Jensen en Meckling (1976) t debt, allowing larger managerial residual claims because the need for external equity is reduced by the use of debt, increases managerial effort to work. In addition, (1986) t high leverage free

20、 cash with less to waste unprofitable investments as a result.11 The agency costs n management external equity are often left out the trade-off theory since it mes managers acting on behalf of the shareholders (only) which is an a trade-off theory.mption of the yers (1984) and Myers and Majlufs (198

21、4) pecking order 12 thereunprofitable investments as a result.11 The agency costs n management external equity are often left out the trade-off theory since it mes managers acting on behalf of the shareholders (only) which is an a trade-off theory.mption of the yers (1984) and Myers and Majlufs (198

22、4) pecking order 12 there is optimal capital structure. Instead, because of asymmetric information and problems asso hierarchy,wited with external financing13, firms financing policies follow ionofthisernaloverexternalfinance,andfordebtoverAtfirmsdonotaimargetdebtInstead,thedebtratioisjustthecumulat

23、iveresultof hierarchicalertime. sarethe t higher(See Shyum-Sunder & Myers, 1999.) Original les of signalling s of Ross (1977) and Leland and Pyle (1977). Ross (1977) lleverage can be used by managers to signal an optimistic future for the t these signals cannot be ed by sful firms14. Leland and (197

24、7) focus on owners instead of managers. They a better information on the expected cash flowst entrepreneurs n outsiders have. The informationheld byan entrepreneur canbetransferred rs ofcapital it is in the erest to invest a greater fraction of his wealth in projects. Thus the owners willingness to

25、invest in his own projects can serve as a signalofprojectquality.Thevalueofthefirmincreaseswiththepercentageofequity held by the entrepreneur relative to the percentage he would have held in case of a lower quality project. (Copeland, Weston & Shastri, 2005.)The stakeholder theory formulated by Grin

26、blatt & Titman (2002)15 t way in which a firm and its non-l eract is an determinant of the firms optimal capital structure. Non-l stakeholders those parties n the debt and equity holders. Non-l include firms customers, rs and the overall community in thefirmoperates.Thesestakeholderscanbehurtby afir

27、msldifficulties.lecustomersmayreceiveinferiortaredifficulttomay lose business, employees may lose jobs and the economy can be Because of the costs they potentially he event of a firms l non-lstakeholderswillbeerestedceterisparibusngbusinessa firm having a high(er) potential for l difficulties. This

28、reluctancetodobusinessdistressedfirmcreatesatcandeterafirmundertaking sive debt financing even when lenders are willing to provide it favorableterms(Ibid.,p.598).Theseconsiderationsbynon-lstakeholdersthecauseoftheirimportanceasdeterminantforthecapitalstructure.Thisstakeholder theory could be seen as

29、 part of the trade-off theory (see Brealey, Myers and Allen, 2006, p.481, although the term stakeholder theory is not mentioned) since stakeholdersinfluencetheindirect costsofl Asthetrade-offtheory(excludingagencycostsnmanagersandand the pecking order theory, the stakeholder theory of Grinblatt and

30、Titman amesshareholderizationasthesinglecorporateBasedonthese theories,ahuge numberof empirical studieshavebeenproduced. e.g. Harris & Raviv (1991) for a systematic overview of this literature18. More recent studiesaree.g.Shyum-Sunder&Myers(1999),testingthetrade-offtheoryagainstthe pecking order the

31、ory, Kemsley & Nissim (2002) estimating the present value of shield,Andrade&Kaplan(1998)estimatingthecostsofe.g. Harris & Raviv (1991) for a systematic overview of this literature18. More recent studiesaree.g.Shyum-Sunder&Myers(1999),testingthetrade-offtheoryagainstthe pecking order theory, Kemsley

32、& Nissim (2002) estimating the present value of shield,Andrade&Kaplan(1998)estimatingthecostsofldistressandRajanZingales(1995)investigatingthedeterminantsofcapitalheG-7Rajan & Zingales (1995)19 explain in leverage of individual firms firmheirstudyleverageisafunctionoftangibilityofassets,tobookratio,

33、firmsizeandprofitability.Barclay&Smith(1995)provideanempirical examinationofthedeterminantsofcorporatedebtmaturity.Graham&Harvey(2001) survey392CFOsabouta.o.capitalstructure.WecomebacktothisGraham&Harvey study in Section 3.20CrosssectionalstudiesasbyTitmanandWe s(1988),Rajan&Zingales(1995)Barclay &

34、Smith (1995) and Wald (1999) capital structure erms leverageand then leverageas afunction of differentfirm(and market) aggestedbycapitalstructure theory21. Wedo the ite.Wedoyze effectofseveralfirmcharacteristicsoncapitalstructure(c.q.leverage),butthe effect of capital structure on t co-determine sha

35、reholder value. several deci role of deci theoryarelisteds, including capital structure s, these variables may get criteria. Criteria which are related to the trade-o able 1.nd pecking 3.OtherobjectivesandA lot of t not erest of shareholders (see Myers, 2001). Neither the trade-off theory nor the or

36、der theory can fully explain in capital structure. Myers (2001, t Yet even 40 years after the Modigliani and Miller research, understandingofthesefirms22financingis limited.Resultsofseveral(seeCools 1993, Graham & Harvey, 2001, Brounenetal., 2004) t CFOs notpayalotofattentiontovariableshesesharehold

37、ertheories. Given the results of empirical research, this does not come as a surprise. The survey by Graham and Harvey finds only moderate evidence for the trade-offtheory. Around 70% have a or a somewhat or range. 10%havearatio.Around20%ofthefirmsdeclarenottohave andebt-equityratioatIn general, the

38、 corporate tax advantage seems only y important in s.Thetaxadvantageofdebtismostimportantforlargeregulateddividend paying firms. Further, favorable foreign tax treatment relative to the US fairly important in ing foreign debt s23. Little evidence is al taxes influence the capital structure24. In gen

39、eral potential costs of distressseemnotveryimportantalthoughcreditratingsare.AccordingtoGrahamand Harvey this last finding could be viewed as (an indirect) indication of concern with distress. Earnings volatility also seems to be a determinant of leverage, which consistent with the t firms reduce leverage when the probability bruptcyishigh.Firmsdonotdeclaret(thepresentvalueofthecosts of l distress are an important determinant of capital structure, indirect eems to exist. Graham and Harvey find little t tindirect eems to exist. Graham and Harvey find little t tdisc