Company financing, capital structure and ownership: a survey and implications for developing countries

Abstract

This paper critically surveys the key literature on corporate financing policy, capital structure\nand firm ownership in order to identify the leading theoretical and empirical issues in this area.\nThe theoretical component of the survey attempts to reconcile competing theories of capital\nstructure and appraises recent models which use agency theory and asymmetric information to\nexplore the impact of managerial shareholdings, corporate strategy and taxation on the firm’s\ncapital structure. The empirical component focuses on univariate analyses as well as multivariate\nmodels of capital structure, and makes a comparison between theoretical predictions and\nempirical results. Implications are identified in terms of promising research ideas (PRIs) for\nfurther research. The bulk of the empirical research that we survey is concerned with the\nexperience of a few western industrial countries, and the implications of this research are\nassessed accordingly. However, we also aim to draw out implications for new research in\ndeveloping and newly industrialised countries with an expanding corporate sector.

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