“Capital Structure” Determinants: A Conceptual and Empirical Review

Abstract

Choosing the right kind of financing is considered essential and critical in the world of business finance. It is the combination of debt and equity financing that a company uses to sustain its funding patterns that is referred to as the “capital structure” of a company. For this project, we will examine theoretical and empirical research on capital structure, as well as the primary elements that influence how organisations choose their capital structure. The present study looks at the main competing “capital structure” theories, as well as the assumptions that drive each of them. The examination highlights the factors that impact a company's “capital structure” decision. Factors of “capital structure” determinants discovered via empirical study on “capital structure” determinants so far.

Research Methodology: The nature of Present Research study is descriptive based and conceptual, Empirical review paper. The data has been collected from various repute journals such as Elsevier Science direct, articles published in peer-reviewed journals, textbooks etc. The review is based on various research works that were selected through well defined inclusion and exclusion criteria.

Results: Many research studies on large organisations have been done using secondary data and regression models, and many of these studies have been conducted on large organisations utilising primary data. It was discovered that the impact of leverage differs by industry, which should be examined further in future study. The present research examines ““capital structure” theories” and factors that impact “capital structure” selection in the financial industry. When it comes to “capital structure” choices, firms have been demonstrated to follow the pecking order theory.