scholarly journals The Leland-Toft Optimal Capital Structure Model Under Poisson Observations

2019 ◽  
Author(s):  
Zbigniew Palmowski ◽  
José-Luis Pérez ◽  
Budhi Surya ◽  
Kazutoshi Yamazaki
Keyword(s):  
Capital Structure ◽  
Structure Model ◽  
Optimal Capital Structure ◽  
Optimal Capital

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 OPTIMAL CAPITAL STRUCTURE WITH SCALE EFFECTS UNDER SPECTRALLY NEGATIVE LÉVY MODELS

2014 ◽  
Vol 17 (02) ◽  
pp. 1450013 ◽  
Author(s):  
BUDHI ARTA SURYA ◽  
KAZUTOSHI YAMAZAKI
Keyword(s):  
Capital Structure ◽  
Scale Effects ◽  
Scale Function ◽  
Structure Model ◽  
Optimal Capital Structure ◽  
Bankruptcy Costs ◽  
Numerical Studies ◽  
Asset Value ◽  
Optimal Capital ◽  
Tax Benefits

The optimal capital structure model with endogenous bankruptcy was first studied by Leland (1994) and Leland & Toft (1996), and was later extended to the spectrally negative Lévy model by Hilberink Rogers (2002) and Kyprianou Surya (2007). This paper incorporates scale effects by allowing the values of bankruptcy costs and tax benefits to be dependent on the firm's asset value. By using the fluctuation identities for the spectrally negative Lévy process, we obtain a candidate bankruptcy level as well as a sufficient condition for optimality. The optimality holds in particular when, monotonically in the asset value, the value of tax benefits is increasing, the loss amount at bankruptcy is increasing, and its proportion relative to the asset value is decreasing. The solution admits a semi-explicit form in terms of the scale function. A series of numerical studies are given to analyze the impacts of scale effects on the bankruptcy strategy and the optimal capital structure.

scholarly journals The Leland–Toft optimal capital structure model under Poisson observations

2020 ◽  
Author(s):  
Zbigniew Palmowski ◽  
José Luis Pérez ◽  
Budhi Surya ◽  
Kazutoshi Yamazaki
Keyword(s):  
Capital Structure ◽  
Structure Model ◽  
Optimal Solutions ◽  
Standard Case ◽  
Optimal Capital Structure ◽  
Numerical Studies ◽  
Asset Value ◽  
Optimal Capital ◽  
Optimal Leverage ◽  
Independent Poisson Process

We revisit the optimal capital structure model with endogenous bankruptcy first studied by Leland \cite{Leland94} and Leland and Toft \cite{Leland96}. Differently from the standard case, where shareholders observe continuously the asset value and bankruptcy is executed instantaneously without delay, we assume that the information of the asset value is updated only at intervals, modeled by the jump times of an independent Poisson process. Under the spectrally negative L\'evy model, we obtain the optimal bankruptcy strategy and the corresponding capital structure. A series of numerical studies are given to analyze the sensitivity of observation frequency on the optimal solutions, the optimal leverage and the credit spreads.

scholarly journals The Leland–Toft optimal capital structure model under Poisson observations

2020 ◽  
Author(s):  
Zbigniew Palmowski ◽  
José Luis Pérez ◽  
Budhi Surya ◽  
Kazutoshi Yamazaki
Keyword(s):  
Capital Structure ◽  
Structure Model ◽  
Optimal Solutions ◽  
Standard Case ◽  
Optimal Capital Structure ◽  
Numerical Studies ◽  
Asset Value ◽  
Optimal Capital ◽  
Optimal Leverage ◽  
Independent Poisson Process

We revisit the optimal capital structure model with endogenous bankruptcy first studied by Leland \cite{Leland94} and Leland and Toft \cite{Leland96}. Differently from the standard case, where shareholders observe continuously the asset value and bankruptcy is executed instantaneously without delay, we assume that the information of the asset value is updated only at intervals, modeled by the jump times of an independent Poisson process. Under the spectrally negative L\'evy model, we obtain the optimal bankruptcy strategy and the corresponding capital structure. A series of numerical studies are given to analyze the sensitivity of observation frequency on the optimal solutions, the optimal leverage and the credit spreads.

scholarly journals The Leland–Toft optimal capital structure model under Poisson observations

2020 ◽  
Vol 24 (4) ◽  
pp. 1035-1082
Author(s):  
Zbigniew Palmowski ◽  
José Luis Pérez ◽  
Budhi Arta Surya ◽  
Kazutoshi Yamazaki
Keyword(s):  
Capital Structure ◽  
Optimal Strategies ◽  
Structure Model ◽  
Standard Case ◽  
Optimal Capital Structure ◽  
Numerical Studies ◽  
Asset Value ◽  
Optimal Capital ◽  
Optimal Leverage ◽  
Independent Poisson Process

Abstract This paper revisits the optimal capital structure model with endogenous bankruptcy, first studied by Leland (J. Finance 49:1213–1252, 1994) and Leland and Toft (J. Finance 51:987–1019, 1996). Unlike in the standard case where shareholders continuously observe the asset value and bankruptcy is executed instantaneously without delay, the information of the asset value is assumed to be updated periodically at the jump times of an independent Poisson process. Under a spectrally negative Lévy model, we obtain the optimal bankruptcy strategy and the corresponding capital structure. A series of numerical studies provide an analysis of the sensitivity, with respect to the observation frequency, of the optimal strategies, optimal leverage and credit spreads.

Sign in / Sign up

Export Citation Format

Share Document