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- Title
Corporate capital structure in the United Kingdom: determinants and adjustment.
- Authors
Bunn, Philip; Young, Garry
- Abstract
This article presents information on the actions that companies normally take to adjust when their debt gets out of line with their desired level. The study presented in this article provides an empirical test of the "trade-off" theory of corporate capital structure, which suggests that firms have an equilibrium level of capital gearing that is determined by trading off the advantages of holding debt against the expected costs of financial distress, which becomes more likely at high debt levels. It is informed that firms in Great Britain have target levels of capital gearing at the aggregate level, which in the long run depend on the tax advantages of debt and on the probability of bankruptcy.
- Subjects
UNITED Kingdom; CORPORATE finance; CAPITAL structure; DEBT; DEBT management; BANKRUPTCY
- Publication
Bank of England Quarterly Bulletin, 2004, Vol 44, Issue 3, p327
- ISSN
0005-5166
- Publication type
Article