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Influential Factors and Approaches of Capital Structure Theory

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DOI: 10.25236/memssr.2021.020


Yu Linhong

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Yu Linhong


This article reviews almost all the preliminary and fundamental capital structure theories. Capital structure is still an unsettled puzzle and scholars are constantly in search of those factors that help a firm to articulate optimal capital structure. The following explains theories of capital structure elucidate a theoretical platform for the firm’s management that assist them to select optimal mixture of equity and debt. Therefore, the importance of these theories is not possible to ignore. This article is an attempt to discuss nearly all capital structure theories to deliver a comprehensive explanation for the firm’s management which help them to formulate their capital structure in accordance with theoretical guidelines.


Capital Structure Theories, Company Value, D/E ratio, Optimal Capital Structure