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New Mechanism of Formation of the Company’s Optimal Capital Structure, Different from Suggested by Trade-Off Theory

  • Peter Brusov
  • Tatiana Filatova
  • Natali Orekhova
  • Mukhadin Eskindarov
Chapter

Abstract

Under condition proved by us, insolvency of the well-known classical trade-off theory and question of finding new mechanisms of formation of the company’s optimal capital structure, different from the one suggested by trade-off theory, become very important. One of the real such mechanisms is developed by us in this chapter. It is based on the decrease of debt cost with leverage, which is determined by growth of debt volume. This mechanism is absent in perpetuity Modigliani–Miller theory, even in modified version, developed by us, and exists within more general modern theory of capital cost and capital structure by BrusovFilatovaOrekhova (BFO theory).

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Copyright information

© Springer Nature Switzerland AG 2018

Authors and Affiliations

  • Peter Brusov
    • 1
  • Tatiana Filatova
    • 1
  • Natali Orekhova
    • 2
  • Mukhadin Eskindarov
    • 1
  1. 1.Financial University under the Government of Russian FederationMoscowRussia
  2. 2.Center of Corporate Finance, Investment, Taxation and RatingsThe Research Consortium of Universities of the South of RussiaRostov-on-DonRussia

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