Finance



Finance

The paper: “What Do We Know about Capital Structure? Some Evidence from International Data” analyze about determinants of capital structure discussed by Modigliani and Miller, which are preferred by different companies around the world. The research investigates about the financing decision made public firms on the basis of capital structure in the major industrialized countries. The research showed that at aggregate level, firm leverage is at the similar point as of the G-7 countries data. The authors of this research also finds that the factors that were analyzed in previous studies correlated in the cross section with firm leveraged in United States, are similarly correlated in other countries as well. However, the research suggests that the United States and other countries, which are theoretically correlated, are still largely unresolved. In this paper I will be discussing about the understanding of particular issues related to the research “What Do We Know about Capital Structure? Some Evidence from International Data”, Secondly, I will briefly summarize the methodology (theoretical or empirical) used by the authors to achieve their objectives.

Elaborate how the paper advanced understanding of the particular issues

The research is based on the Modigliani and Miller theory of Capital structure. The author emphasize in this research on the knowledge about the capital structure for the audience. In the research, the studies were limited to the study the moderating factors specific to the enterprise level and its sector. To my knowledge, researchers have paid little attention to the moderating effects specific countries in which the company operates. However, studies suggest that the capital structure or the use of debt differs from one country or culture to another. Analyzing the determinants of capital structure companies in the G7 (United States, Canada, Germany, Italy, France, Japan and United Kingdom) have found similarities in the level of leverage of the seven countries, both in pays country bank (Japan, Germany, France and Italy), and that of other countries exchange with each other (United States and Canada), but with a lower leverage in the UK and Germany. Significantly, differentiation occurs at the institutional level, as they have demonstrated that stock market activity and the importance of the banking sector are two major causes of international differences in capital structure. In the research study of the ownership structure of G-7 countries, the author tries developing the observation that if they are affected by the same variables as those in developed ...