Theoretical Review of Capital Structure and Its Determinants

This paper present several traditional theories discussed on capital structure, such as trade-off theory, MM hypothesis and theory of pecking-order etc then investigates the significant factors determining capital structure decision such as tax, profitability, size, tangibility, Volatility, and Liquidity etc. paper suggested that size and tangibility are positively related to leverage while Growth opportunities, Volatility, and Liquidity is negatively related to leverage. But no consistent relationship is drawn between taxes, profitability with respect to leverage.