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Home > QFINANCE Dictionary > Definition of perfect capital market

Definition of

perfect capital market

Economics

when buying and selling do not affect prices a situation in which the decisions of buyers and sellers have no effect on market price in a capital market

Recommended Further Reading (Term count)
  • Optimizing the Capital Structure: Finding the Right Balance between Debt and Equity
    by Meziane Lasfer
    There are three financing methods that companies can use: debt, equity, and hybrid securities. This categorization is based on the main characteristics of the securities.Debt FinancingDebt financing ranges from simple bank debt to commercial paper and corporate bonds. It is a contractual arrangement between a company and an investor, whereby the company pays a predetermined claim (or interest) that is not a function of its operating performance,...
  • Capital Structure: Implications
    by John C. Groth
    A tax environment that allows for the deduction of interest charges, but not the deduction of dividends, results in an optimal capital structure for a company. The optimal structure results in a lower weighted cost of capital (WCOC) for reasons examined in the article, Capital Structure: Perspectives. This article examines the implications of capital structure, and some of the key factors that influence capital structure.
  • Capital Structure: A Strategy that Makes Sense
    by John C. Groth
    Perfect capital markets enjoy an array of assumptions, including no cost to bankruptcy, infinitely divisible financial assets and liabilities, no transaction costs, etc. Pursuing a selected optimal capital structure would allow minute adjustments, the issuance or redemption of small amounts of capital, and other conveniences. We would simply strive for the optimal debt/equity ratio depicted in Figure 1. Indeed, in this unreal world one would...
perfect capital market - Related Articles

  • Capital Structure: Implications

    Best Practice

    Moving from L to the optimal level is quite easy. Borrow money and buy back some shares. Moving from M back to the optimal level is, in theory, equally easy, but in practice may face challenges depending on market conditions. Capital structure strategy is discussed in the article, Capital Structure
    By John C. Groth

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Definitions of ’perfect capital market’ and meaning of ’perfect capital market’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’perfect capital market’ and other financial terms with our online QFINANCE Financial Dictionary.

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