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Portfolio Theory in Capital Market

  • Date Submitted: 12/16/2014 01:05 PM
  • Flesch-Kincaid Score: 40.9 
  • Words: 478
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Abstract 1:
This academic article is going to examine how the environment of institution has impact on the capital structure and choices of debt maturity structure made by corporations located in thirty nine countries including developed and developing countries. The results of the examination show that several factors in a countries clearly explain a significant portions of the difference in the leverage and the debt ratios indifferent countries, including a country’s legal and tax system, corruption, and the preferences of the capital suppliers. To be specific, those corporations located in countries with more corruption and in those countries with weaker law system are more likely to use more debts, especially using more short term debts. In addition, explicit bankruptcy codes and deposit insurance are closely associated with higher leverage and more long term debts. Corporation located in countries where there is a greater tax gain from leverage of debt will tend to use more debt in their capital structure because using tax will have tax benefits to the corporation thanks to that interest of debt is tax deductible.

Fan, J. P. H., Titman, S. & Twite, G. (2012) An International Comparison of Capital Structure and Debt Maturity Choices ebscohost.com [online]. Available at:
http://eds.b.ebscohost.com/eds/pdfviewer/pdfviewer?sid=6b4cba5e-2ab3-40f7-85f3-45d993eaa591%40sessionmgr111&vid=6&hid=108
Accessed: 30 November 2014.

Abstract 2:
This academic article aims to examine the influence of specifically containing one kind of measurements of debt capacity when recently conducting tests of contesting different theories of capital structure. The main results of the examination are that regardless of concerning the limited debt capacity, if additional funds are required for reinvestment, debt seems to be more preferable than equity because of several advantages of using debts to finance the business, such as tax benefits. Although there are also...

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