{"title":"An Ebit-Based Model of Dynamic Capital Structure","authors":"R. Goldstein, Nengjiu Ju, H. Leland.","doi":"10.2139/ssrn.136716","DOIUrl":null,"url":null,"abstract":"A model of dynamic capital structure is proposed. Even though the optimal strategy is implemented over an arbitrarily large number of restructuring-periods, a scaling feature inherent in the framework permits simple closed-form expressions to be obtained for equity and debt prices. When a firm has the option to increase future debt levels, tax advantages to debt increase significantly, and both the optimal leverage ratio range and predicted credit spreads are more in line with what is observed in practice. Copyright 2001 by University of Chicago Press.","PeriodicalId":293777,"journal":{"name":"Hong Kong: Information Systems (Topic)","volume":"33 7-8 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2001-12-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"1024","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Hong Kong: Information Systems (Topic)","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.136716","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 1024
Abstract
A model of dynamic capital structure is proposed. Even though the optimal strategy is implemented over an arbitrarily large number of restructuring-periods, a scaling feature inherent in the framework permits simple closed-form expressions to be obtained for equity and debt prices. When a firm has the option to increase future debt levels, tax advantages to debt increase significantly, and both the optimal leverage ratio range and predicted credit spreads are more in line with what is observed in practice. Copyright 2001 by University of Chicago Press.
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