It has long been argued that “judicious” use of debt increases firm value and, therefore, shareholder wealth. The widely accepted view of capital structure is that there exists some optimal range of debt levels that maximizes shareholder wealth.
However, a recent study by the authors does not support this view. Our results suggest that, within a large sample of firms over an extended period of time, firms with a lower percentage of debt have higher value. This implies that firms should reevaluate their use of debt.
Content: Article
Authors: Joseph A. Newman, Ph.D., Michael D. Kinsman Ph.D.
Source: Graziadio Business Report
Subjects: Finance, Management
Authors: Joseph A. Newman, Ph.D., Michael D. Kinsman Ph.D.
Source: Graziadio Business Report
Subjects: Finance, Management
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