Construct · 1 fields · 1 citations

trade-off theory of capital structure: a standalone construct

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Corporate finance

the view that firms choose leverage by balancing the tax benefits of debt against the expected costs of financial distress.

In corporate finance, trade-off theory of capital structure refers to the view that firms choose leverage by balancing the tax benefits of debt against the expected costs of financial distress. This meaning comes from Kraus (1973) in The Journal of Finance.[1]

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Nearby constructs

capital structure4 names · 6 citationsjangle · one leverage choice, rival theories capital2 fields · 3 citationsjingle · one word, two constructs costs of financial distress1 fields · 1 citationsanchor · a standalone construct

References

Kraus, A., & Litzenberger, R. H. (1973). A State‐preference Model of Optimal Financial Leverage. The Journal of Finance, 28(4), 911-922. https://doi.org/10.1111/j.1540-6261.1973.tb01415.x

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