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(100% . 2017 What Managers Think of Capital Structure Theory: A Survey 1) Purpose of the article: If it is difficult for a firm to measure impact on the value of the firm under different levels of leverage, it should not be surprise that managers are not very concerned about maintaining an exact capital structure. This article uses a survey to learn about managers opinions regarding capital structure. 2) Scope of the Article: This article reports on a survey which examines the extent managers use the assumptions and/or inputs of capital structure models generated by academicians in making financing decisions. 3) Classification of the article: Empirical ✓ 4) Findings: The capital structure models considered here can be classified conveniently into three groups: models that imply an optimal combination of long-term funds, models that imply an optimal hierarchy in raising funds, and models that imply neither of these approaches. In general, static tradeoff models predict that firms maintain a target debt-equity ratio that maximizes firm value by minimizing the costs of prevailing market imperfections. . Further, models based on corporate and/or personal taxes and bankruptcy and other leverage-related costs are not as useful in determining the financing mix as are models that suggest that new financing reveals aspects of the firm's marginal asset performance. Sampling Procedures: A list of the Fortune 500 firms for 1986 was obtained from the April 27, 1987 edition of Fortune magazine. Standard and Poor's Register of Directors and Executives was then used to find the names and addresses of the chief financial officer of each firm. No attempt was made to identify specific firms that participated. Thus, cross-classifying financing prefer- ences with firm size, industry, or ownership structure is not possible. The low ranking of bankruptcy costs is not surprising given the size and success of the firms in our sample, the extensive treatment of tax arguments in the finance literature coupled with the recent major changes in the tax law suggest that taxes should be more important to managers in making financing decision. Financial Planning Principles: Managers' relative disinclination toward capital structure theory, in gen-eral, is further reflected in their rankings of seven financial planning principles summarized in Exhibit 3. Five of the seven principles there have mean ranks of 3.90 or higher. Corporate managers in this sample are more likely to follow a financing hierarchy than to maintain a target debt-equity ratio. Further, models based on corporate and/or personal taxes and bankruptcy and other leverage-related costs are not as useful in determining the financing mix as are models that suggest that new financing reveals aspects of the firm's marginal asset performance.
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Manager's Line of Thought in Relation the Capital Structure: A survey
1. Purpose of the Article
Firms encounter hardships when measuring the impact on the value of the company at differing
levels of leverages. Managers seem to be less concerned about the issues of maintaining the
capital structure.
The paper applies the survey to get more information about managers regarding the structure
2. The scope of the Article
From this Article, the report focus on a study examining the scope managers use
assumptions and evaluation of the capital structure model formulated by...


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