Which of the following factors do not seem to matter in the choice of a capital structure?
A)the capital structure of a firm's peers
B)pecking order concerns
C)agency concerns
D)All of the above factors seem to matter in the choice of a capital structure.

Question

Quizplus · Accepted Answer

All of the factors mentioned in the options seem to matter in the choice of a capital structure. The capital structure of a firm's peers can influence its own choice as it provides a benchmark for comparison. Pecking order concerns can affect the decision-making process as the firm may prefer to use retained earnings first and resort to external financing as a last resort. Agency concerns are important as the choice of capital structure can affect the alignment of interests between managers and shareholders. Thus, all these factors should be taken into consideration while making a decision about capital structure. All of the factors listed seem to matter in the choice of a capital structure. The capital structure of a firm's peers can provide guidance or benchmarks for what is considered appropriate in a given industry or market, while pecking order concerns refer to the idea that firms will prefer to finance investment opportunities with retained earnings or debt before issuing new equity. Agency concerns relate to the potential conflicts of interest between debt and equity holders, as well as between managers and shareholders, which can influence the trade-offs between risk and return in a firm's capital structure decisions.

Which of the Following Factors Do Not Seem to Matter