Abstract
For nearly 40 years, capital structure decisions have been regarded as an enduring puzzle (Myers, 1984; DeAngelo, 2022). The concept of optimal capital structure is often described as complex and even likened to the Holy Grail of corporate finance. Despite extensive research, there is little convergence between contending theories (DeAngelo, 2022). Additionally, managers have imperfect knowledge, making it difficult to determine an ideal capital structure with any real degree of precision (DeAngelo, 2021).
Previous empirical studies largely employed a reductionist approach focusing on isolated aspects of the complexity of capital structure. Because the literature lacks a comprehensive approach to the concept of optimal capital structure, the novel holistic capital structure framework has been developed through the fresh lens of the interdisciplinary complex adaptive system (CAS) theory. This theory is well-suited to address complexity within a system that recognises the whole, thereby bettering our understanding of the mechanisms informing a sustainable financing strategy imperative for a firm's long-term resilience and value creation.
Additionally, the vastness and inconclusiveness of the empirical literature on capital structure demand further research. For this reason, an exploratory sequential mixed-methods design was employed, which, in the context of capital structure, is rarely done. In the qualitative phase, a revised documentary and citation analysis incorporating the PRISMA approach was developed to mitigate researcher bias and improve transparency and credibility. The result was a refined list of the most prominent firm-related capital structure determinants, accompanied by preferred measurements to improve consolidation and simplicity. Capital structure determinant studies from 1972 to 2023 were targeted, with the results of 335 articles identifying the six most prominent capital structure determinants as: tangibility, growth proxied by the market-to-book value of equity (MTB), profitability, firm size, non-debt tax shield (NDTS), and business risk. It was noted that capital structure book value measurements also appear to be more reliable than market-based measures. These results informed their inclusion in the quantitative phase...