Discussion of Papers Entitled "Do Managers have Capital Structure Targets and "The Capital Structure Puzzle" Article Review by Nicky

This paper is a discussion of two papers, "Do Managers have Capital Structure Targets?" by Vikas Mehrotra, Wayne Mikkelson and Megan Partch and "The Capital Structure Puzzle," by Michael Barclay and Clifford Smith.
# 147926 | 1,522 words | 0 sources | 2011 | US
Published on Aug 11, 2011 in Business (Companies) , Business (Management)


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Description:

This paper looks at a couple of Articles on capital structure:"Do Managers have Capital Structure Targets?" by Vikas Mehrotra, Wayne Mikkelson and Megan Partchand, and "The Capital Structure Puzzle," by Michael Barclay and Clifford Smith. The author explains that the main contribution of the first paper is that it provides evidence that managers use the tradeoff theory in selecting a target capital structure. Regarding the second paper, the author explains that the conclusions drawn by the authors are that firms do aim for a desired capital structure, since they make decisions based on the costs of adjusting the capital structure versus the cost of deviating from it.

From the Paper:

"Barclay and Smith find that of the three variables, information costs have the weakest relationship with leverage. From this they draw the conclusion that the pecking order theory does not in general hold. They also find that taxes play a role to some extent, based on a finding that 5-10% of the average firm's value is attributable to tax savings from debt. Lastly they also find that contracting costs has a strong relationship with leverage. As the growth opportunities increased the amount of leverage decreased."

Cite this Article Review:

APA Format

Discussion of Papers Entitled "Do Managers have Capital Structure Targets and "The Capital Structure Puzzle" (2011, August 11) Retrieved January 28, 2023, from https://www.academon.com/article-review/discussion-of-papers-entitled-do-managers-have-capital-structure-targets-and-the-capital-structure-puzzle-147926/

MLA Format

"Discussion of Papers Entitled "Do Managers have Capital Structure Targets and "The Capital Structure Puzzle"" 11 August 2011. Web. 28 January. 2023. <https://www.academon.com/article-review/discussion-of-papers-entitled-do-managers-have-capital-structure-targets-and-the-capital-structure-puzzle-147926/>

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