The Capital Structure Puzzle

Stewart C. Myers President of American Finance Association 1983 This paper's title is intended to remind you of Fischer Black's well-known note on “The Dividend Puzzle,” which he closed by saying, “What should the corporation do about dividend policy? We don't know.” 6 I will start by asking, “How do firms choose their capital structures?” Again, the answer is, “We don't know.” The capital structure puzzle is tougher than the dividend one. We...