Classical capital structure theories in a new context: Synthesis with ESG and digital transformation practices

Introduction. This article analyzes the evolution of theoretical approaches to capital structure management in the context of ESG transformation and digitalization. Particular attention is paid to the adjustment of classical theories to modern challenges, including sanctions’ restrictions and changes in investors’ demands. Purpose. The article aims at systematizing modern capital structure management practices and correlating them with classical theoretical models in order to identify robust relationships between theory and practice. This can explain the adaptive mechanisms of corporate financial strategies in the context of a changing capital market. Materials and methods. Comparative analysis of classical capital structure theories and empirical data from the Russian metallurgical companies revealed key trends: a transition to dynamic debt management, extensive use of hybrid tools, the integration of ESG factors into financial strategy, and the centralization of treasury functions. Results. Classical theories are found to be methodologically relevant but require their adjustment to current conditions. An empirical relation between the evolution of theoretical approaches and contemporary challenges is revealed: ESG transformation has led to modifications to tradeoff theory by incorporating environmental risks, digitalization has strengthened the role of agency theory by reducing information asymmetry, and geopolitical constraints have updated the theory of financial flexibility. The author proposes an integrated matrix for correlations between modern practices and classical theories of capital structure, as well as a refined definition of capital structure as an adaptive system that regard the requirements of sustainable development and digital transformation. It is found that Russian metallurgical companies successfully combine the elements of various theories, adjusting them to current challenges. Conclusions. Modern capital structure is interpreted as a dynamic concept focused on financial flexibility and sustainability. This research is of interest to financial managers and corporate finance researchers. Potential future research includes the development of quantitative models for assessing the efficiency of modern capital structure management practices.