Capital structure literature review for airline industry

In order to establish this equilibrium firms should seek debt levels at which the costs of possible financial distress offset the tax advantages of additional debt. Finally, firm size is positively related to debt. The other financial market is the capital market that can be divided into two sectors: organized and unorganized. Their findings indicate that both, market timing model and trade-off model, can explain and contribute to the optimal choice of capital structure. It uses case studies of Qantas, Jetstar, Virgin and Tiger airlines to demonstrate how they all need to employ profit-maximising strategies that take into account the likely response to the strategies of other firms. The success of any economic system largely depends on the efficient regulatory and legal environment. Taxes Trade off theory has a saying that the firm tend to borrower more debt if it imposes larger tax rate. By means of this clarification they Myers and Fama and French shows that at the same time a link bounded by the market-to-book ratio and capital structure is hard to accommodate with the static pecking order standard. Carrying out our research, results will provide us important and useful information in order to exam if our hypotheses are verified or not. Journal of Finance, 53, — Shipping Derivatives and Risk Management, first ed. Exactly how firms choose the amount of debt and equity in their capital structures remains an enigma. In view of trade off theory we find that a firm which has lesser profit margin leads in gaining debts and that means increasing financial distress cost.

Hence, capital structure decisions have a great impact on the success of the firm. Table I. Tangibility As said by Myers and Majluf the company with greater property may be taken as collateral which leads much higher debt as it is lesser than the guaranteed debt so the managers know more than 5 outside shareholders about the investment.

The study shows that trade-off theory features are important determinant of the fraction of debt to be repurchased or issued under the pecking order assumptions whereas the pecking order features are primary determinants of the speed of adjustment under the trade-off theory assumptions hence implying that both theories are not mutually exclusive.

View publication stats Related Papers. Growth opportunities are negatively related to debt H2.

Literature review on aviation security

The costs of debt are that the inflexibility of the rules can result in liquidation of the assets when they are more valuable in the firm. Throughout this paper, three companies will be evaluated. The unorganized sector is primarily made up of moneylenders. Thus, this has reduced the treat to Malindo Airline. DSE and CSE do not ensure disclosure of information on listed companies to protect investors' interest. This indicates the overwhelming preference of bank finance in industrial investment financing. At the same time, Frank and Goyal test the pecking order theory analysing US companies for the period -

First, we focus on the theory of capital structure. Finally, with regard to further empirical work, it seems essential that empirical studies concentrate on testing particular models or classes of models in an attempt to discover the most important determinants of capital structure in given environments.

Additionally Barclay et al and Myers advised that tax benefits must trade off contrary the desired cost of financial distress and that is fairly to increase with the level of gearing.

Finally, our conclusions are presented in Section VI. This inefficiency is reduced the larger is the fraction of the firm's equity owned by the manager. But one who practiced if ignored authorial cautions.

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The determinants of bank capital structure. The hospital has several units like children center, maternity

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(PDF) Determinants of Profitability in the Airline Industry