The theory and practice of corporate finance: Evidence from the field

Journal Article (Journal Article)

We survey 392 CFOs about the cost of capital, capital budgeting, and capital structure. Large firms rely heavily on present value techniques and the capital asset pricing model, while small firms are relatively likely to use the payback criterion. A surprising number of firms use firm risk rather than project risk in evaluating new investments. Firms are concerned about financial flexibility and credit ratings when issuing debt, and earnings per share dilution and recent stock price appreciation when issuing equity. We find some support for the pecking-order and trade-off capital structure hypotheses but little evidence that executives are concerned about asset substitution, asymmetric information, transactions costs, free cash flows, or personal taxes.

Full Text

Duke Authors

Cited Authors

  • Graham, JR; Harvey, CR

Published Date

  • May 1, 2001

Published In

Volume / Issue

  • 60 / 2-3

Start / End Page

  • 187 - 243

International Standard Serial Number (ISSN)

  • 0304-405X

Digital Object Identifier (DOI)

  • 10.1016/S0304-405X(01)00044-7

Citation Source

  • Scopus