source of increased profitability in the normal business scenario. It has always been challenging to find the correct debt …-to-total assets ratio was observed. Thus, it is inclined to investigate the capital structure (CapSt) effect on firms’ profitability … Total Equity to Total Assets (TETAs)) on the profitability (Return on Assets (ROA) and Return on Equity (ROE)) of firms in …

optimal dynamic control problem is characterized by two stochastic state variables: the equity value, and profitability (ROA …) of the _rm. According to the empirical evidence, we let profitability follow a mean reverting process. The problem is … solved in a quasi-explicit form by computing both the optimal dividend and the optimal debt. Finally, we calibrate the model …