In short, corporate financial planning oversight can be greatly restrained and monopolized if the locus of corporate control is not all that large (Brav, 2009).
Macroeconomic Condition Influence
Another unquestionable influence on corporate financial planning and the capital structure of the firms being managed are the wider macroeconomic conditions of the economy, whether it be regional, national or global, that is in play for a given firm. As the 2007-2009 global recession proved, macroeconomic metrics being shoddy can have significant repercussions on what is done and why vis-a-vis capital structures in firms. Many firms have become very conservative and have reduced risk exposure greatly. Many pundits and scholars have lauded this decision as it's been viewed as a cause of the economic fracas in the first place but some others have said that firms are being too conservative and unwilling to invest when they can and should. Even so, cash flows generally do not rise during recessions, so this easily explains why corporate financial planning and how it leads to capital structure changes is so much more conservative during harsh economic times (Chen, 2010).
One item that macroeconomic conditions affect is the debt markets and how expensive it becomes to borrow money. One study looked at for this report assessed heterogeneity of debt and how it affects the research and development as well as the firm performance at large for a company. Obviously, all firms must plan for the future and if their debt and/or broader capital structure restricts their ability to innovate and thus remain competitive, this will constrict their ability to thrive and survive. As such, effective corporate financial planning must ensure that the mix of debt used and the broader capital structure is in sync with the long-term needs and goals of the firm (David, O'Brien & Yoshikawa, 2008).
Ownership Structure and M&a
As already referred to from prior research, ownership structure has a demonstrable effect on capital structure decisions as well as the broader topic of...
Public firms in particular are subject to hostile takeovers and this often leads to the use of tactics such as poison pills and other mitigating measures as a disparate group of shareholders could be swayed much more easily in a public firm as compared to a private firm with very few owners that have no interest in being taken over. Regardless, countermeasures used to avoid or block a takeover certainly have an effect on the capital structure of a firm as it is an integral part to a firm's long-term financial planning portfolio (Gorton & Kahl, 2008).
Conclusion
In conclusion, firms need to be vigilant in careful in their corporate financial planning decisions for the short- and long-term time horizons. They must make sure their capital structure takes advantage of opportunities while not opening up the firm to dangerous conditions. It is a balance act that must be done carefully
References
Brav, O. (2009). Access to Capital, Capital Structure, and the Funding of the Firm.
Journal of Finance, 64(1), 263-308. doi:10.1111/j.1540-6261.2008.01434.x
Chen, H. (2010). Macroeconomic Conditions and the Puzzles of Credit Spreads and Capital Structure. Journal of Finance, 65(6), 2171-2212. doi:10.1111/j.1540-
David, P., O'Brien, J.P., & Yoshikawa, T. (2008). The IMPLICATIONS of DEBT
HETEROGENEITY for R&D INVESTMENT and FIRM PERFORMANCE.
Academy of Management Journal, 51(1), 165-181.
doi:10.5465/AMJ.2008.30772877
Gorton, G., & Kahl, M. (2008). Blockholder Scarcity, Takeovers, and Ownership
Structures. Journal of Financial & Quantitative Analysis, 43(4), 937-974.
Taggart, J.A. (1980). Taxes and Corporate Capital Structure in an Incomplete Market.
Journal of Finance, 35(3), 645-659.
