IDEAS home Printed from https://ideas.repec.org/a/fip/fedbcp/y1989p12-48n33.html
   My bibliography  Save this article

The changing nature of debt and equity; a financial perspective

Author

Listed:
  • Franklin Allen

Abstract

As a result of the historical importance of debt and equity, the traditional focus of inquiry into firms’ choice of capital structure has been "What is the optimal debt/equity ratio?" This approach lead to the Modigliani and Miller theorems and a large body of subsequent work but has not been very successful in explaining firms’ actual choices of debt and equity. The notion that firms finance their activities with debt and equity is a simplification; corporations have issued securities other than standard debt and equity for many centuries. This fact and the rapid pace of financial innovation in recent years suggests that a more fundamental issue than "What is the optimal debt/equity ratio?" is "What are the optimal securities that should be issued?" This paper surveys recent studies of capital structure that have looked at this question.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Franklin Allen, 1989. "The changing nature of debt and equity; a financial perspective," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 33, pages 12-48.
    • Handle: RePEc:fip:fedbcp:y:1989:p:12-48:n:33
    as

    Download full text from publisher

    File URL: http://www.bostonfed.org/economic/conf/conf33/conf33b.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bohn, Henning, 1995. "Towards a theory of incomplete financial markets A review essay," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 433-449, November.
    2. Matthew Spiegel & S. Ravid, 1998. "Optimal Financial Contracts for a Start-Up with Unlimited Operating Discretion," Yale School of Management Working Papers ysm77, Yale School of Management, revised 01 Aug 2000.
    3. Houston, Joel F. & Venkataraman, S., 1996. "Liquidation under moral hazard: Optimal debt maturity and loan commitments," Journal of Banking & Finance, Elsevier, vol. 20(1), pages 115-133, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedbcp:y:1989:p:12-48:n:33. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Spozio (email available below). General contact details of provider: https://edirc.repec.org/data/frbbous.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.