A Model of Dynamic Compensation and Capital Structure

This paper studies a model of dynamic compensation and capital structure with managerial traits. We show that Optimistic manager perceives equity as more undervalued than debt, while, confident manager perceives debt as more undervalued than equity. Managerial risk aversion mitigates manager’s bias. The risk aversion of the optimistic manager has a convex effect on the optimal coupon. There exists the level of risk aversion eliminating the bias on the leverage. The managerial optimist has an ambiguous effect on the owner’s bankruptcy level. The risk aversion has a convex effect on the owner’s bankruptcy level. The optimistic/confident manager underestimates the credit spread. The risk aversion has convex effect on the credit spread. In contrast to rational manager, the optimistic/confident manger has higher level of effort. The risk aversion has a negative effect on the effort.

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Analysis of Factors Affecting Capital Structure in Food and Beverage Manufacturing Company

International Journal on Advanced Science Education and Religion ◽

10.33648/ijoaser.v1i2.7 ◽

2018 ◽

Vol 1 (2) ◽

pp. 1-14

Author(s):

Nur Hajja Aini ◽

St Habibah

Keyword(s):

Capital Structure ◽

Firm Size ◽

Significant Influence ◽

Fixed Effects ◽

Random Effect Model ◽

Manufacturing Companies ◽

Business Risk ◽

Growth Opportunities ◽

Food And Beverage ◽

The Capital Structure

The purpose of this research to analyze the influence of firm size, liquidity, growth opportunities, tangibility asset, and business risk to the capital structure of listed food and beverage manufacturing companies in Indonesia and Vietnam Stock Exchange from 2010 to 2016. The result shows that the fixed effects model should be appropriate for this study as compared to the random effect model. Capital structure significantly differences between the two countries. Firm size has a positive but insignificant influence on the capital structure in Indonesia, whereas it has a positive and a significant influence on the capital structure in Vietnam. Liquidity has a negative and significant influence on the capital structure both in Indonesia and Vietnam. Growth opportunities have a negative but insignificant influence on the capital structure both in Indonesia and Vietnam. Asset tangibility has a positive but insignificant influence on the capital structure in Indonesia, but it has the negative but insignificant influence on the capital structure in Vietnam. Ultimately, the business risk has a negative and significant influence on the capital structure in Indonesia but has a positive and insignificant influence on the capital structure in Vietnam.

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