The Theory of Capital Structure

  • Author(s): MILTON HARRIS, ARTUR RAVIV
  • Published: Apr 30, 2012
  • Pages: 297-355
  • DOI: 10.1111/j.1540-6261.1991.tb03753.x

ABSTRACT

This paper surveys capital structure theories based on agency costs, asymmetric information, product/input market interactions, and corporate control considerations (but excluding tax‐based theories). For each type of model, a brief overview of the papers surveyed and their relation to each other is provided. The central papers are described in some detail, and their results are summarized and followed by a discussion of related extensions. Each section concludes with a summary of the main implications of the models surveyed in the section. Finally, these results are collected and compared to the available evidence. Suggestions for future research are provided.

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