Using a simple theoretical model, this paper argues that an increase in foreign presence, which refers to the level of foreign investment in a given domestic firm, can affect the leverage of domestic firms. We apply the model to explore the link between foreign presence and leverage with firm...

This paper examines the optimal capital structure of a firm that delegates its financing decision of a risky project to a manager who is both risk averse and regret averse. Regret aversion is characterized by a utility function that includes disutility from having chosen ex-post suboptimal...

We consider how equity holders’ bargaining power during financial distress influences the interactions between financing and investment decisions when the firm faces the upper limit of debt issuance. We obtain four results. First, weaker equity holders’ bargaining power is more likely that...

The contribution deals with the role of the branch standards in the process of the optimizing of the capital structure of the concrete firm. The enterprises can use the branch standards available and adjust their indebtedness on this level besides the process of the active optimizing. The...

The aim of this contribution is to analyze if does the debt policy theoretically and practically matter in concrete firm. The contribution is based on a basic analysis of single theories and their possible usage in the process of concrete optimizing. Also the practical usage of theories is...

Since the Miller and Modigliani (1958, 1963) theory of capital structure the literature struggles to include cost of financial distress in the cash flow theories of capital structure. Besides that most of the recent models are static. Let us just remind the contributions by Cooper, and Nyborg...

In this paper, we explore two of the most relevant theories that explain financial policy in small and medium enterprises (SMEs): pecking order theory and trade-off theory. The theoretical section provides an overview of contemporary theories of capital structure. According to the pecking order...

Modigliani and Miller theories, held as one of the most important theoretical compass for the world of Corporate Finance, has stated some aspects and measurements in which will determine one company’s step of heading towards financial decision of its capital structure. Modigliani and Miller...

The relationship between product market performance of a firm and its capital structure has drawn considerable amount of attention recently amongst corporate finance researchers. The same was established to be non-monotonic in the context of a developed market. The non-monotonicity in the...

This paper analyzes the investments of the Italian mechanical firms with a model with simultaneous investments and financial structure. In our empirical specification the neoclassical and the new-keynesian «excess sensitivity» models are empirically contrasted as two sub-cases of a more...