Firm Optimization across Capital Forms

Woongki Lee
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Woongki Lee: Yonsei University

No 4pysq_v1, SocArXiv from Center for Open Science

Abstract: This study derives a model of firm optimization across capital forms and incorporates the resulting optimality conditions into asset pricing. The structure of the problem depends on how profitability is modeled. When profitability is endogenous, optimization is grounded in production decisions; when profitability is exogenous, it is organized around operating profit. These alternative assumptions yield two asset pricing frameworks, each with a factor representation derived from the firm’s decision margins. By relating these representations to established pricing factors, the study provides a structured economic basis for reinterpreting established factors through firm optimization.

Date: 2026-08-07
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:4pysq_v1

DOI: 10.31219/osf.io/4pysq_v1

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