Factors influencing debt financing decisions of corporations – theoretical and empirical literature review

Abstract

Over the past half century, there has been an increasing interest on identifying the factors influencing debt financing within corporations. Based on available literature, both from developed and developing economies, this literature review paper examined the factors influencing debt financing decisions within corporations. Applying desktop research methodology, the paper used a three-thronged approach: theoretical, methodological and empirical. The theoretical approach reviewed the key theories proposed with respect to corporations’ debt financing decisions. The methodology approach helped in identifying the common applicable conceptual models and the empirical findings related to the factors affecting debt financing of corporations. The factors identified were both firm specific and macroeconomic factors, and the empirical findings showed either positive or negative relationship results.