Impact of Capital Structure on Corporate Value—Review of Literature

Abstract

The issue of capital structure in an enterprise is often described in the literature on the subject; however, theories are classified into various approaches, and their characteristics are often limited to selected theories. This work is an attempt at a synthetic presentation of the theory of capital structure. The aim of the article was to review and try to organise the most important theories of capital structure, paying attention to the influence of capital structure on the processes of creating value. The paper also highlights the most important theoretical works in this area. The study consists of two main parts. The first part indicates the diversity of defining the concepts of capital structure and indicates the approaches in classifying this structure. The second part characterises the theories of capital structure in the context of value creation. Based on the presented theories, it can be stated that there is no agreement as to whether and to what extent capital structure translates into the process of creating enterprise value. Therefore, it seems justified to conduct appropriate empirical research in this respect.

Sermaye Yapısının Belirleyicileri: BIST’de İşlem Gören İmalat Sektörü Firmaları Üzerine Ampirik Bir Araştırma

“…The problem of the theory of capital structure was first taken up by D. Durand, who made an attempt in 1952 to explain the dependencies between the structure of capital and the cost of its acquisition. On the other side, the Modigliani-Miller model is considered to be the source of the development of the theory of corporate finance (Kruk, 2021).…”

Stock Liquidity and Firm Value: The Mediating Role of Capital Structure

“…In the world of no taxes and absence of other market imperfections, no matter how the capital structure of a firm is split among debt, equity and other claims; an enterprise value depends primarily on its underlying profitability (Durand, 1952;Modigliani & Miller, 1958) and risk (Modigliani & Miller, 1958). With the use of 'cheaper' debt funds, it becomes increasingly risky; investors penalise the stock by demanding a higher risk premium, increasing the cost of equity (Kruk, 2021). The fact that the cost of debt is lower than the cost of equity is exactly offset by the increase in the required rate of return on equity (Durand, 1952;Modigliani & Miller, 1958).…”

Madurez de la deuda corporativa como variable de tiempo: evidencia de las empresas públicas de México

“…Siguiendo la línea de investigación sobre la estructura de capital, y dado que es el punto de partida de este estudio, al analizar la deuda como una parte fundamental de este concepto, encontramos el trabajo realizado por Kruk (2021). Este autor realiza una síntesis de los principales estudios realizados sobre el tema, sobre todo en el contexto de la creación de valor de las empresas.…”