Capital Structure Decision - Theoretical Underpinnings and Empirical Evidences

The objective of the paper is to survey the theories on the capital structure with objective to ascertain whether the capital structure decision is relevant for a firm. The theoretical underpinnings have been surveyed from the theory of irrelevance by Modigliani and Miller to recent theories like Pecking order and Market Timing theory of capital structure. The theoretical underpinnings have been substantiated with empirical evidences from developed and developing economies.