Optimal Capital Structure, Corporate Debt Valuation and Credit Spreads under State-Dependent Volatility and Jump Process Asset Dynamics

2012 ◽  
Author(s):  
Stylianos Perrakis ◽  
Rui Zhong
Keyword(s):  
Capital Structure ◽  
Jump Process ◽  
Credit Spreads ◽  
Corporate Debt ◽  
Optimal Capital Structure ◽  
State Dependent ◽  
Optimal Capital ◽  
Debt Valuation

scholarly journals Dividend Policy, Personal Taxes and Optimal Capital Structure

2020 ◽  
Vol 9 (2) ◽  
pp. 1
Author(s):  
Sheen Liu ◽  
Yan Alice Xie
Keyword(s):  
Capital Structure ◽  
Real World ◽  
Dividend Policy ◽  
Credit Spreads ◽  
Structure Model ◽  
Optimal Capital Structure ◽  
Personal Taxes ◽  
Wide Range ◽  
Optimal Capital ◽  
Tax Benefits

<p>This paper puts forward a capital structure model that incorporates the impacts of dividend policy and personal taxes that are commonly ignored by the existing capital structure models. The results show that paying dividends can reduce the tax benefits from issuing debts, which explains why existing capital structure models commonly overestimate leverage ratios. The results further show that as dividend payout increases, leverage ratios and credit spreads increase too. By incorporating the impacts of dividend policy and personal taxes, the capital structure model established in this paper can generate wide range of leverage ratios and credit spreads, which are consistent with what are observed in the real world.</p>

scholarly journals Creditor Coordination, Liquidation Timing, and Debt Valuation

2011 ◽  
Vol 46 (5) ◽  
pp. 1407-1436 ◽  
Author(s):  
Max Bruche
Keyword(s):  
Capital Structure ◽  
Closed Form ◽  
Continuous Time ◽  
Structural Model ◽  
Coordination Failures ◽  
Closed Form Solutions ◽  
Optimal Capital Structure ◽  
Optimal Capital ◽  
Debt Valuation ◽  
Creditor Coordination

AbstractThis paper derives closed-form solutions for values of debt and equity in a continuous-time structural model in which the demands of creditors to be repaid cause a firm to be put into bankruptcy. This allows discussion of the effect of creditor coordination in recovering money on the values of debt, equity, and the firm, as well as on optimal capital structure. The effects of features of bankruptcy codes that prevent coordination failures between creditors, such as automatic stays and preference law, are also considered. The model suggests that such features, while preventing coordination failures, can decrease welfare.

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