Funding decision is one of the financial strategic decisions of a corporation. There are also two other finan-cial strategic decisions that a corporation faces, the investment and the dividend decision. This paper de-scribes briefly the investment and the dividend decision, although its main focus is on funding decision. In de-scribing the funding decision the researchers will first explain the...

We empirically examine whether firms engage in a dynamic rebalancing of their capital structures while allowing for costly adjustment. We begin by showing that the presence of adjustment costs has significant implications for corporate financial policy and the interpretation of previous empirical results. After confirming that financing behavior is consistent with the presence of adjustment cos...

Some advocates of far higher capital requirements for banks invoke the Modigliani-Miller theorem as grounds for judging that associated costs would be minimal. The M&M theorem holds that the average cost of capital to the firm is independent of capital structure, because any reduction in capital cost from switching to higher leverage using lowercost debt is exactly offset by an induced increase...

Most capital structure models assume that the decision of how much debt to issue is a static choice. In practice, however, firms adjust outstanding debt levels in response to changes in firm value. In this article, we solve for the optimal dynamic capital strategy of a firm and investigate the implications for optimal leverage ratios and the magnitude of the tax benefits to debt. Below, we cons...