TY  - JOUR
AU  - Myers,Stewart C.
TI  - Capital Structure Puzzle
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1393
PY  - 1984
Y2  - July 1984
UR  - http://www.nber.org/papers/w1393
L1  - http://www.nber.org/papers/w1393.pdf
N1  - Author contact info:
Stewart C. Myers
Massachusetts Institute of Technology
Sloan School of Management
E62-620
77 Massachusetts Avenue
Cambridge, MA 02142
Tel: 617/253-6696
Fax: 617/258-6855
E-Mail: scmyers@mit.edu
AB  - This paper contrasts the "static tradeoff" and "pecking order" theories of capital structure choice by corporations. In the static tradeoff theory, optimal capital structure is reached when the tax advantage to borrowing is balanced, at the margin, by costs of financial distress. In the pecking order theory, firms preferinternal to external funds, and debt to equity if external funds are needed. Thus the debt ratio reflects the cumulative requirement for external financing. Pecking order behavior follows from simple asymmetric information models. The paper closes with a review of empirical evidence relevant to the two theories.
ER  -