Abstract
The question of what should be the appropriate proportion of equity and debt capital for a firm to maximize its shareholders wealth and firm value has a long debate since there is no single optimum formula for that. This paper with the intends to provide a theoretical aspect of the chronological development of prominent capital structure theories over years along with an empirical aspect to evaluate the popular approaches of capital structure practices among financial managers in Bangladesh and to see whether there exist any significant differences in the impact of those approaches in the financial performances of those firms. The more careful choices of capital structure components with more sophisticated situation and combinations by the financial managers and considering the modern complex investment decision making influenced by psychological and/or cognitive biases of the investors and stakeholders are the policy implication of this paper.
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