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Introduction
Prior research on capital structure by Antoniou et al. (2002) suggest that the capital structure decision of a firm is not only the product of its own characteristics, but also the result of environment and traditions in which it operates. This paper would focus on the external determinants of corporate capital structure in different countries to find out if environment and traditions factors play important roll in corporate capital structure. ... In the first part, I present the prior research in capital structure; In the second part, I would discuss the different concepts of the effect of environment and traditions on corporate capital structure and in the last part; I sum up the argument of the paper and offer a conclusion.
Prior Research
In the last nearly forty years, there were many research on the capital structure. Most of them were focus on the internal determinants of corporate capital structure such as profitability, tangibility of assets, firm size, the market to book ratio and so on. ... Their paper reveal that the firms in all three countries adjust their debt ratios to attain their target capital structure but at different speed, eg. ... Since they believe these three countries have different traditions: the UK follows a more market-oriented tradition while Germany follows a more bank-oriented approach, with France falling in between the two traditions; They get a conclusion that environment and traditions play important roll in corporate capital structure.
However, Rajan and Zingales (1995) find that the capital structure differences are not easily explained by whether they are market-oriented or bank-oriented countries, which previously thought was important.
Approximate Word count = 1226
Approximate Pages = 4.9
(250 words per page double spaced)
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