Optimal Capital Structure
John Graham, D Richard Mead Jr Family Professor of Finance, Duke University | 2013 FMA Annual Meeting Tutorial Presentation
This session presents an approach to teach capital structure (debt vs. equity choice) to MBAs, building upon academic research. The approach begins by arguing that firms should choose the capital structure that maximizes value, and then discusses research that explicitly estimates cost and benefit of debt functions that determine the optimal amount of debt for any given firm.
Survey evidence is integrated throughout, to demonstrate that this research-based teaching approach captures the factors that executives say affect their capital structure choices.
The session culminates by demonstrating how the methods in this lecture can be implemented in an Excel spreadsheet.
____
John is the D. Richard Mead Jr. Family Professor of Finance at Duke University (2007 - present) and the Faculty Co-Director of the Center for Financial Excellence (2007 - present). He has published articles in Financial Management, Journal of Finance, Journal of Financial Economics, Review of Financial Studies, Quarterly Journal of Economics, Journal of Accounting and Economics, Journal of Accounting Research, National Tax Journal and Financial Analysts Journal, among others. He is the lead author of Corporate Finance: Linking Theory to What Firms Do (with Scott B. Smart and William L. Megginson, 2009) and Introduction to Corporate Finance (with Scott B. Smart, 2011) (Cengage).