We derive and present the formula for optimal debt under the assumption that tax shields are discounted at the cost of levered equity, Ke and cash flows are on perpetuity. The formulation is consistent and is derived from basic financial principles. This formulation is valid for non-growing...

We present the derivation of cost of capital under the assumption of risky tax shields discounted with the cost of levered equity. We show that the formulation is consistent and is derived from basic financial principles. This formulation is valid for finite cash flows and non growing...

This paper empirically examines how debt covenants impact the capital structure choices of firms, by utilizing an exogenous accounting based shock to the distance to covenant violation. We find that, on average, the shock to debt capacity had a positive impact on the debt choices of all treated...

Modern institutes of the market form new factors of the global economy. Stock exchanges, other institutes of the investment market, financial Internet communications create the integrated pace of world economic system. The companies test direct influence from global information-financial space....

La versión española de este artículo se puede encontrar en: "http://ssrn.com/abstract=1826264" http://ssrn.com/abstract=1826264This paper shows how to proceed to find the optimal capital structure and value with period-to-period constant and variable leverage, when the discount rate for tax...

This paper has an English version and can be downloaded from: "http://ssrn.com/abstract=1799605" http://ssrn.com/abstract=1799605En este trabajo se muestra cómo encontrar la estructura óptima de capital y el valor con un endeudamiento constante y variable período a período, cuando la tasa de...

In this note, we present a simple numerical example, with a finite cash flow, to illustrate the concept of the Optimal Capital Structure (OCS). First, we assume that the discount rate for the tax benefits K_TB equals the return to unlevered equity K_U. The cost of debt K_D is a simple linear...

In this paper we report the results from a survey among all publicly listed Nordic firms on their policy decisions concerning their capital structure. We find that more than 60 percent of the companies have rather or relatively flexible debt target, whereas a strict target or no target at all is...

This paper treats a firm's capital structure decision as an optimal risk taking decision based on its risk-return tradeoff prospect. The paper proposes to construct mean-variance ratio forecasts based on return-on-asset histories and shows that the forecasts can explain a large proportion of the...

I identify three sources of risk for the tax shields: two of them associated to the risk of debt and one associated to the operating risk. I present a set of conditions for defining risky debt associated to cash flow and not to accounting earnings. I explain why realization of tax shields for...