A comprehensive review on capital structure theories

Abstract

This studyreviews different theories andhypothesisin regard with obtaningan optimal capital structure. Many researchers believe that capital structure includes share issuance, private investment, bank debt, business debts, leasing contracts, tax debt, retirement debt, deferred compensation for executives and employees, deposits, product related-debt and other probable debt. These theories and hypothesis include: Net income,net operational income, traditional approach theory, Miller andModigliani theory, static trade–off theory, asymmetric of the information hypothesis, pecking order theory, signaling theory, agency cost theory,free cash flow hypothesis, dynamic trade-off theory and market timing theory. By applying these theories, we will be able to reach a maximum return with minimum risk and also increase the value of corporation. Because of the close relationship between profitability and capital structure in this paper is going to apply genetic algorithmmodel, support vector regression and profitability factor to reach an international range of optimal capital structure hoping to find an international point of capital structure in the future. Key words: Profit Margin, Support Vector Regression, International Optimal Capital Structure, Leverage, Genetic Algorithm.

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