Year: 1996
Author: Erlei, Mathias, Schmidt-Mohr, Udo
Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 116 (1996), Iss. 4 : pp. 561–591
Abstract
In this paper we analyze the impact of asset specificity on the capital structure of a firm. We show that the transaction cost economic argument in Williamson (1988) is at least incomplete in major aspects. However, we find that his basic idea that higher asset specificity leads to a lower debt / equity ratio is confirmed in our theoretically more consistent model. Some additional insights from our model are: (a) Project aggregation has an impact on the firm's optimal capital structure even if all projects of the firm show the same specificity. Therefore, a project oriented analysis as presented by Williamson (1988) is problematic, (b) The relationship between asset specificity and capital structure holds only if uncertainty is prevalent.
Journal Article Details
Publisher Name: Global Science Press
Language: Multiple languages
DOI: https://doi.org/10.3790/schm.116.4.561
Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 116 (1996), Iss. 4 : pp. 561–591
Published online: 1996-04
AMS Subject Headings: Duncker & Humblot
Copyright: COPYRIGHT: © Global Science Press
Pages: 31