Finance & Investing · Corporate Finance
A topic within Corporate Finance, itself one of 11 topics in that field and part of Finance & Investing.
Assumes you know the vocabulary.
The Capital Structure Puzzle
Stewart C. Myers · 1984
Argues firms follow a pecking order of internal funds, then debt, then equity as a last resort, rather than targeting a fixed debt ratio, because…
Primary sources and full treatments.
The Cost of Capital, Corporation Finance and the Theory of Investment
Franco Modigliani & Merton H. Miller · 1958
Proves that, absent taxes and other frictions, a firm's total market value is independent of how it splits financing between debt and equity, because…
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3 works
Stewart C. Myers
Argues firms follow a pecking order of internal funds, then debt, then equity as a last resort, rather than targeting a fixed debt ratio, because information asymmetry makes external financing progressively more costly to raise.
link checked 17 Sept 2026Franco Modigliani & Merton H. Miller
Proves that, absent taxes and other frictions, a firm's total market value is independent of how it splits financing between debt and equity, because investors can replicate any capital structure themselves through personal borrowing.
link checked 17 Sept 2026Michael C. Jensen & William H. Meckling
Models the firm as a nexus of contracts between managers and outside shareholders and debtholders, showing that separating ownership from control creates agency costs that capital structure and compensation design exist to reduce.
link checked 17 Sept 2026