债券型资本.doc

Introduction Since Modigliani–Miller theory was put forward by Modigliani and Miller in 1958,they had formed the basis for modern idea and thinking about capital structure.This theory is that it does not matter if the firms capital is raised by issuing stock or selling debt,it does not matter what the firms dividend policy is. (Modigliani, F.; Miller, M,1958)Therefore, the theory is also often called the capital structure irrelevance principle.Neverthless,our society is ever-changing,it’s impossible that predecessors theory is always unalterable. In the current situation, many companies see the tax advantage,consequently,in order to lower the cost of capital to the business and increase their income,they made it a trend to adopt a use of debt in the capital structure rather than issuing shares.What should corporation do about divided policy?How do firms choose their capital structures? For vast majority of enterprise managers,the answer is, I don’t know.This essay will firstly critically review existing literature related to the subject under discussion.Following this,it will demonstrate the author’s understanding of the literature, introduce empirical examples and clearly demonstrate originality of expression analytically. Literature Review When trying to draw a clear conclusion from literature,readers’ mind will be confused by moral-all books. There are about two main theories of capital structure: One advocates using debt to solve the problem, this theory proposes to increase debt levels to balance interest to shield against the cost of financial distress. The company should keep on borrowing until the marginal tax advantage of additional debt is offset by the increase in present value of the expected costs of financial distress.But this settlement also has disadvantage, the main disadvantage of debt financing is that it requires a small business to make regular monthly payments of principal and interest. Very young companies often experience shortages in cash f