Capital Structure and Corporate Financing Decisions

H. KENT BAKER, PHD, CFA, CMA, is University Professor of Finance and Kogod Research Professor at the Kogod School of Business at American University, Washington, D.C. He has published extensively in leading academic and professional finance journals including the Journal of Finance, Journal of Financial and Quantitative Analysis, Financial Management, Financial Analysts Journal, and Journal of Portfolio Management. Recognized as one of the most prolific authors in finance during the past fifty years, Professor Baker has consulting and training experience with more than 100 organizations and has been listed in fifteen biographies. GERALD S. MARTIN, PHD, is an Associate Professor of Finance at the Kogod School of Business at American University, Washington, D.C. He has published in top scholarly journals, including the Journal of Financial Economics and Journal of Financial and Quantitative Analysis. Before embarking on his academic career, Professor Martin spent seventeen years in the private sector as president and CEO of TMI Aircraft Finance/TMI Leasing, LLC, financing aircraft and aviation products worldwide for Textron Financial Corporation, as well as in marketing and research at Bell Helicopter Textron Inc.

• Acknowledgments ix1 Capital Structure: An Overview 1H. Kent Baker and Gerald S. MartinPart I The Elements of Capital Structure 152 Factors Affecting Capital Structure Decisions 17Wolfgang Bessler, Wolfgang Drobetz, and Robin Kazemieh3 Capital Structure and Corporate Strategy 41Maurizio La Rocca4 Capital Structure and Firm Risk 59Valentin Dimitrov5 Capital Structure and Returns 75Yaz Gulnur Muradoglu and Sheeja Sivaprasad6 Capital Structure and Compensation 93Alan Victor Scott Douglas7 Worldwide Patterns in Capital Structure 111Carmen Cotei and Joseph FarhatPart II Capital Structure Choice 1278 Capital Structure Theories and Empirical Tests: An Overview 129Stein Frydenberg9 Capital Structure Irrelevance: TheModigliani-Miller Model 151Sergei V. Cheremushkin10 Trade-Off, Pecking Order, Signaling, and Market Timing Models 171Anton Miglo11 Estimating Capital Costs: Practical Implementation of Theory’s Insights 191Robert M. Conroy and Robert S. Harris12 Economic, Regulatory, and Industry Effects on Capital Structure 211Paroma Sanyal13 Survey Evidence on Financing Decisions and Cost of Capital 229Franck Bancel and Usha R. Mittoo14 Survey Evidence on Capital Structure: Non-U.S. Evidence 249Abe de Jong and Patrick VerwijmerenPart III Raising Capital 26115 The Roles of Financial Intermediaries in Raising Capital 263Neal Galpin and Heungju Park16 Bank Relationships and Collateralization 281Aron A. Gottesman and Gordon S. Roberts17 Rating Agencies and Credit Insurance 299John Patrick Hunt18 Secured Financing 319Hugh Marble III19 Sale and Leasebacks 335Kyle S. WellsPart IV Special Topics 35120 Financial Distress and Bankruptcy 353Kimberly J. Cornaggia21 Fiduciary Responsibility and Financial Distress 371Remus D. Valsan and Moin A. Yahya22 The Lease versus Buy Decision 387Sris Chatterjee and An Yan23 Private Investment in Public Equity 401William K. Sjostrom Jr.24 Financing CorporateMergers and Acquisitions 419Wolfgang Bessler, Wolfgang Drobetz, and Jan ZimmermannAnswers to Chapter Discussion Questions 445Index 475