Capital structure decisions and the optimal design of corporate market debt prograams

Capital structure decisions and the optimal design of corporate market debt prograams This paper provides a joint quantitative analysis of capital structure decisions (debt versus equity) and debt structure decisions (fixed-rate debt versus floating-rate debt or inflation-linked debt) in a continuous-time setting. We show that optimizing the debt structure has an impact on capital structure decisions, and leads to increases in leverage ratios compared to a pure fixed-rate debt program. We also find that for realistic parameter values, jointly optimizing the debt and capital structures generates a significant increase in firm value with respect to a situation where only the capital structure is optimized. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Corporate Finance Elsevier

Capital structure decisions and the optimal design of corporate market debt prograams

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Publisher
Elsevier
Copyright
Copyright © 2017 Elsevier Ltd
ISSN
0929-1199
D.O.I.
10.1016/j.jcorpfin.2017.11.011
Publisher site
See Article on Publisher Site

Abstract

This paper provides a joint quantitative analysis of capital structure decisions (debt versus equity) and debt structure decisions (fixed-rate debt versus floating-rate debt or inflation-linked debt) in a continuous-time setting. We show that optimizing the debt structure has an impact on capital structure decisions, and leads to increases in leverage ratios compared to a pure fixed-rate debt program. We also find that for realistic parameter values, jointly optimizing the debt and capital structures generates a significant increase in firm value with respect to a situation where only the capital structure is optimized.

Journal

Journal of Corporate FinanceElsevier

Published: Apr 1, 2018

References

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