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Investment-based optimal capital structure
Applied Economics, 2018This paper extends the classical capital structure model by introducing the output of firm with ‘AK’ production technology dynamically depends on the endogenous investment decision and capital accu...
Jinglu Jiang, Xin Xia, Jinqiang Yang
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Ruin Considerations: Optimal Working Capital and Capital Structure
The Journal of Financial and Quantitative Analysis, 1975At any point in time a firm must decide both the level of working capital consistent with its productive assets and how to finance these assets. Academic theorists in business administration have traditionally approached decision making of the firm on a segmented rather than on a global basis and have been satisfied with developing suboptimizing ...
H. Bierman, K. Chopra, J. Thomas
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Bankruptcy Risk and Optimal Capital Structure
The Journal of Finance, 1983ABSTRACTThis study finds shortcomings in empirical tests of the capital structure irrelevance hypothesis. The alternative hypothesis is that firms choose value maximizing mixes of debt and equity on account of bankruptcy costs and the tax deductibility of interest payments.
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Optimal Capital Structure, Debt Structure, and Investment
SSRN Electronic Journal, 2009We examine the optimal capital structure and priority structure of multiple classes of debt using a dynamic model where firms face a tradeoff between bankruptcy costs, interest tax shield benefits, and investment benefits. As a base case, we first analyze jointly optimal policies for a firm initially constrained to a single class of debt, which results
Dirk Hackbarth, David C. Mauer
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Optimal Capital Structure of Banks with Contingent Capital: A Structural Model
SSRN Electronic Journal, 2011This paper justifies, in an agency context, the existence of hybrid securities appeared very recently on the organized market: the cocos (contingent convertible bonds). Like the straight debt, they make it possible to profit from tax benefits of debt. And, like stocks, they provide protection against financial distress. Although cocos cannot completely
Christine Maati-Sauvez, Jerome MAATI
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Debt Capacity, Optimal Capital Structure, and Capital Budgeting Analysis
Financial Management, 1978* As far back as 1955, Solomon [9] recognized that capital budgeting decisions should consider the debtcarrying capacity that a proposed capital project adds to the firm. Since then, much work has been done on the nature of debt capacity and its value to the firm.
Hai Hong, Alfred Rappaport
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Capital structure as optimal contracts
The North American Journal of Economics and Finance, 1999Abstract Motivated by the existence of audited accounting income, this paper introduces observable income into an otherwise costly-state-verification model. It is shown that the optimal contract between the corporate insider and the outside investors can be interpreted as a combination of debt and equity. Testable implications are derived.
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2011
Through time different theories have been proposed to explain the various ways corporations and individuals can fund capital asset projects and select the financial assets used as savings mechanisms. Frictions and transaction costs in the real economy mean that there are advantages in using each type of security.
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Through time different theories have been proposed to explain the various ways corporations and individuals can fund capital asset projects and select the financial assets used as savings mechanisms. Frictions and transaction costs in the real economy mean that there are advantages in using each type of security.
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Optimal Capital Structure for Insurance Companies
SSRN Electronic Journal, 2010This paper analyzes the capital structure decision that insurance companies face. A structural microeconomic model is constructed and solved by means of dynamic optimization. The model allows for a careful analysis of various aspects pertaining to the basic economic trade-off between increasing the level of surplus capital on the one hand, incurring ...
Laeven, R.J.A., Perotti, E.C.
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Specific Human Capital, Credible Commitment and Optimal Capital Structure [PDF]
Annals of Economics and Finance, 2004 In this paper, we show that although ex ante equityholders would like to adopt an optimal displacement and operating policy, they may not have incentives to implement such a policy ex post when the manager acquires firmspecific human capital and becomes indispensable to the firm¡¯s continued operation.
Wang, Xiaozu, Zhu, Tian
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