Capital structure is the most debatable topic among the scholars and continues keep researchers to investigate. Capital structure decision consists of mix of debt and equity and this is a crucial decision because false decision may lead to financial distress and even to bankruptcy. Various factors contribute to the choice of these sources of fund for instance country specific characteristic, industry specific characteristic and firm-specific characteristics. Literature shows that there are three major theories of capital structure emerged which diverge from the assumption of perfect capital markets under which the “irrelevance model” is working named as Trade Off theory, Pecking Order theory and later Market Timing theory (Luigi & Sorin, 2009). Therefore, this paper will review the role of different traditional capital structure theories in decision making regarding leverage preference.