Theories of Capital Structure

One of the challenges facing investors is how to choose and adjust their strategic financing mix, forming an optimal capital structure.Most of Tanzanian companies operate under unsatisfactory profit, heavy burden of debts, accrued dividends and other liabilities often fail and cease to operate because of bankruptcy, this is caused by their poor capital structure decisions.This book provided the evidence on the validity of the three theories on capital structures, the static trade-off theory, the pecking order theory (information asymmetry theory), and agency cost theory in the Tanzanian context and lays down key determinants of capital structure decisions.The book enlightens the micro-factors to be considered to prefer debt to equity or equity to debt or both financing strategies.