Abstract

http://ssrn.com/abstract=279468
 
 

Citations



 


 



An EBIT-Based Model of Dynamic Capital Structure


Robert S. Goldstein


University of Minnesota - Twin Cities - Carlson School of Management; National Bureau of Economic Research (NBER)

Nengjiu Ju


Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF)

Hayne E. Leland


University of California, Berkeley - Walter A. Haas School of Business


Journal of Business, Vol. 74, No. 4, October 2001

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.

Accepted Paper Series





Not Available For Download

Date posted: December 29, 2001  

Suggested Citation

Goldstein, Robert S. and Ju, Nengjiu and Leland, Hayne E., An EBIT-Based Model of Dynamic Capital Structure. Journal of Business, Vol. 74, No. 4, October 2001. Available at SSRN: http://ssrn.com/abstract=279468

Contact Information

Robert S. Goldstein (Contact Author)
University of Minnesota - Twin Cities - Carlson School of Management ( email )
19th Avenue South
Minneapolis, MN 55455
United States
612-624-8581 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Nengjiu Ju
Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )
Shanghai
China
Hayne E. Leland
University of California, Berkeley - Walter A. Haas School of Business ( email )
Haas School of Business
545 Student Services Building
Berkeley, CA 94720
United States
(510) 642-8694 (Phone)
(510) 643-1420 (Fax)
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