Dynamics in Corporate Leverage Behaviour

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An appropriate capital structure is a vital decision for any business firm in achieving its objectives. The decision is important not only to optimize returns or benefits to various stakeholders of the firm, but also due to the impact such a decision will have on an organization¿s ability to deal with its competitive environment. Therefore, capital structure is an ongoing debate in corporate finance, which concerns specifically the question of whether there is an optimum capital structure so as to maximize the value of the firm. A common theme in this strand of the literature is that the actual and the desired (or optimal) leverage may not be equal at any time because of market disturbances. This book, therefore, provides a new insight of the behaviour of corporate leverage and dynamic adjustment process of firm¿s capital structure. The analysis would, specially, useful to the leveraged firms, financial authorities of leveraged and non leveraged firms and any one else firms of whom are considering changing capital structures.

Champika Liyanagamage, MBA in Finance (University of Colombo). Senior Lecturer in economics and finance at the Open University of Sri Lanka.