A Survey of Research of Target Debit Ratio

DOI

10.2991/978-94-6463-246-0_72How to use a DOI?

Keywords

Tradeoff theory; target-debt ratio; statistical power; partial adjustment; adjustment cost

Abstract

When firms increase the amount of debt in a situation with corporate tax, the amount of the tax shield and the cost of bankruptcy increase. The tradeoff theory of capital structure states that firms choose their target debt ratio to maximize the value of firms. The problem is that the target can not be directly observed. Many scholars have hotly debated this. Some papers with empirical data test the tradeoff theory and support the target. However, some other articles show that the test of tradeoff theory has no statistical power and can not reject alternative hypotheses. In addition, some scholars test the evidence that supports the tradeoff theory and find out that the evidence has no statistical power. There are many studies on the target debt ratio, and this paper will look at some of the most important ones.

Copyright

© 2024 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Yuang Zhou
AU  - Sihan Qin
PY  - 2023
DA  - 2023/09/26
TI  - A Survey of Research of Target Debit Ratio
BT  - Proceedings of the 3rd International Conference on Economic Development and Business Culture (ICEDBC 2023)
PB  - Atlantis Press
SP  - 598
EP  - 606
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-246-0_72
DO  - 10.2991/978-94-6463-246-0_72
ID  - Zhou2023
ER  -