Literature Review of Capital Structure Theory and Influencing Factors

Abstract

Modigliani and Miller [1] conducted a pioneering study on the theory of capital structure. Many scholars have drawn conclusions that are more in line with economic reality while gradually relaxing the assumptions, thus further enriching and developing the theory of capital structure of the company. Relevant theories about capital structure have gone through two stages: the old capital structure theory and the new capital structure theory. The old capital structure theory is based on a series of strict assumptions, including traditional theory, MM theory and trade-off theory. The new capital structure theory introduces modern analytical tools, such as game theory and information economics, into capital structure analysis, including agency cost theory, signal transmission theory, and superior order financing theory. The factors affecting the capital structure include macro, industry, company, and institutional levels. This paper will summarize the relevant literature at home and abroad, pay attention to the study of capital structure theory and its influencing factors, and then optimize the relevant theoretical framework to provide theoretical basis for decision-making.