The Capital Structure Puzzle
STEWART C. MYERS*

THIS PAPER'ST ITLEI S INTENDEDto 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, p. 8] I will start by
asking, "How do firms choose their capital structures?" Again, the answer is,
"We don't know."