View article

How corporations finance their investment is a central topic in two areas of research. One area is the normative theory of corporate finance. Since the pioneering work of Modigliani and Miller, it has been discussed whether there is any optimal capital structure at all and if so, as most observers now seem to believe, what its determinants might be. A possible reason for the failure of this normative research to lead to a definite answer might be that it rarely relates to positive knowledge concerning the financial patterns which firms in different environments do adopt.