The Pecking Order, Trade-off, Signaling, and Market-Timing Models

Anton Miglo

    Research output: Chapter in Book/Report/Conference proceedingChapter


    The financial crisis of 2008-2009 forced financial economists to look critically at capital structure theory because the problems faced by many companies stemmed from their financing policies. This chapter surveys four major capital structure theories: trade-off, pecking order, signaling, and market timing. These theories directly relate to asymmetric information, agency problems, taxes, and bankruptcy costs. For each theory, a basic model and its implications are presented. These implications are compared to the available research evidence. This is followed by an overview of pros and cons for each theory. A discussion of major recent papers and suggestions for future research are provided.
    Original languageEnglish
    Title of host publicationCapital Structure and Corporate Financing Decisions: Theory, Evidence, and Practice
    EditorsH. Kent Baker, Gerald Martin
    Number of pages20
    ISBN (Print)978-0-470-56952-8
    Publication statusPublished (VoR) - 2011

    Publication series

    NameRobert W. Kolb Series


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