This review evaluates the four major theories of corporate financing: (1) the Modigliani–Miller theory of capital-structure irrelevance, in which firm values and real investment decisions are unaffected by financing; (2) the trade-off theory, in which firms balance the tax advantages of...

This chapter reviews tax research related to whether corporate and personal taxes affect domestic and multinational capital structure, debt maturity, payout policy, compensation policy, risk management, earnings management, leasing, pensions, R&D partnerships, tax shelters, transfer pricing,...

This essay considers dynamic security design and corporate financing, with particular emphasis on informational microfoundations. The central idea is that firm insiders must retain an appropriate share of firm risk, either to align their incentives with those of outside investors (moral hazard)...

This chapter analyzes the securities issuance process, focusing on initial public offerings (IPOs) and seasoned equity offerings (SEOs). The IPO literature documents three empirical patterns: 1) short-run underpricing; 2) long-run underperformance (although this is contentious); and 3) extreme...

We survey the theory and evidence of behavioral corporate finance, which generally takes one of two approaches. The market timing and catering approach views managerial financing and investment decisions as rational managerial responses to securities mispricing. The managerial biases approach...

This paper surveys the literature on payout policy. We start out by discussing several stylized facts that are important to the development of any comprehensive payout policy framework. We then describe the Miller and Modigliani (1961) payout irrelevance proposition, and consider the effect of...