Studies that seek to provide evidence of the determinants of capital structure may be criticised on the grounds that:

Question

Quizplus · Accepted Answer

The criticism of studies on determinants of capital structure is that they do not necessarily imply that leverage affects company value. Thus, while these studies may provide valuable insights into the factors that influence a firm's choice of capital structure, they may not provide direct tests of capital structure theory. However, this does not mean that the determinants identified in these studies are inconsistent with theory or lack statistical significance.

Studies That Seek to Provide Evidence of the Determinants of Capital