The irrelevant capital structure of Modigliani and Miller (1958) suggests that in a perfect capital market firm value is independent of firm capital structure, and thus an optimal capital structure does not exist. However, the assumption of perfect capital markets is unrealistic: taxes, friction, agency costs, and differences in information all exist in reality. Choice of capital structure is important on the objective of firm-value maximization.
Theories of capital structure suggest that some factors might be correlated with leverage. The prevailing views, for example Harris and Raviv (1991), contend that financial variables, for example firm size, growth opportunities, tangibility, and profitability, have influences on the capital structure. Rajan and Zingales (1995) and Wald (1999) find that the above characteristics, which are believed to correlate with leverage in U.S., also influence firm leverage in industrialized countries. Moreover, evidence from Rajan and Zingales (1995) shows that capital structure is fairly similar across these countries. Thus these findings indicate that firm factors identified as correlated in the cross-section with firm leverage in U.S., are similarly correlated in other countries, but it appears that the country factors do not explain the variations in capital structure. However, empirical evidences are completely based on firms in well-developed (G-7) countries, and little is known regarding the capital structure in emerging markets. The legal and institutional environments in emerging markets are believed to differ markedly from those in developed markets.
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Geometrical and physical intuition, both untutored and cultivated, is ubiquitous in the research, teaching, and development of mathematics. A number of mathematical “monsters”, or pathological objects, have been produced which?according to some mathematicians?seriously challenge the reliability of intuition. We examine several famous geometrical, topological and set-theoretical examples of such monsters in order to see to what extent, if at all, intuition is undermined in its everyday roles.
