The Impact of Financing and Capital Structure on Project and Firm Value - Essay Example

Following the 2008 crisis, tangibility and market-to-book ratio had a strong impact on capital structures, unlike the period before the crisis. The negative co-efficient signs in firms were the exact opposite of what existed before the crisis. With further analysis indicating that the pecking order theory has additional explanatory power as compared to trade-off- or marketing theory, interest in the impact of financing and capital structure decisions on project and firm value needs discernment now than before.

 The purpose of the study is to investigate the impact of financing and capital structure decisions on project and firm value Specific Objectives Explore literature indicating that the pecking order theory has additional explanatory power as compared to trade-off- or marketing theory.

Understand the relationships between the additional explanatory power of the pecking order theory and others such as the trade-off- or marketing theory. Make conclusions and recommendations that apply to investment portfolios Chapter Two: Literature ReviewThe recent financial crisis is an opportunity to study the impact of financial shock on capital structures. The relationship between capital structure and the value of firms remains an issue attracting considerable debate (Harrison & Widjaja, 2013).

Historically, the debate has focused on the relevance of optimum capital structures to an individual firm’s value. However, recent findings show that firms should center on maximizing value through capital structures or financial leverage decisions considering their impact on the value of firms. This assertion forms the background of this study, which the researcher hopes will help companies forge a way forward in their capital structure decisions. Chapter Three: Research MethodologyThe chapter discusses the research design used to study the general objective, the population, the data collection method, and analyses.

Research DesignThe study will employ a descriptive and qualitative research method to investigate behavior occurring in this non-contrived situation. In contrast, a comprehensive literature review will aid in gathering information and summarizing literature on eventual yields. The research will also employ a structured questionnaire to collect data from company managers. The literature is meant to unearth information gaps on the research topic while the questionnaire will investigate current expectations of the industry.

Sample PopulationThe sample defines the target population chosen for this study, picked through random sampling. The study will select ten capitalistic firms using a simple random sampling technique. The study will include managers as well as employees from the firms in the sample. The proposed sample size is 10 managers and 30 employees. Sampling ProcedurePurposive sampling is the best sample criterion because this study requires participants with knowledgeable backgrounds on the subject. Data Collection MethodsData collection in this study is achieved through intensive, semi-structured interviews with the sample population, either face-to-face or via the telephone.

Chapter Four: Data Processing, Analysis, and FindingsData Processing and AnalysisData analysis begins from the literature review and extends to the onset of the interviews. It then continues to its end. After data collection, the researcher will deduce the data before interpreting and presenting it. The key points are noted and the similarities as well as differences presented by the managers, and employees are noted too. The coded data will be compared to previous literature to determine key themes that will guide the tabling of findings.