REVIEW ON THE THEORY AND REVIEW OF CAPITAL STRUCTURING FOR DEVELOPING ECONOMY

Objective: Capital structure remains a central issue for appropriate considerations in corporate finance. This article examines the theory of capital structure, with the aim to summarise the empirical reviews related to theories. Method: The paper is based on theoretical reviews. The process discusses issues on capital structure and presents findings from different empirical papers test these theories on data. Because research on capital structure is broad, we narrow the scope to empirical issues based on recent evidence. We only take the results at face value and do not criticize the methods used in the papers. Result and Discussion: In trying to synthesize the theories with the empirical reviews, the result reveals that no single theory incorporates all important factors, capital structure puzzle remains. Also, the outcome of empirical evidence remains mixed. Implications: The survey on the theory and evidence on capital structure has important implication for the capital market since capital structure, itself offers the investors important snapshot into intrinsic objectives and behaviour of the corporate entity. Originality/Value: The note provides advance information to understand and analyse complex issues related to evidence on capital structuring. The relevance and value of the paper are evidenced by the fact that the review provides readers for background information on capital structuring in public or private firms. Recommendations: We recommend that future studies may examine alternative theories that were not reviewed in the paper. Researchers can further consider testing the models on countries’ data.