Dynamic capital structure choice and investment timing

Engelbert Dockner, Richard F. Hartl and Peter Kort

Journal of Economic Dynamics and Control, 2019, vol. 102, issue C, 70-80

Abstract: The paper considers the problem of an investor that has the option to acquire a firm. Initially this firm is run as to maximize shareholder value, where the shareholders are risk averse. To do so it has to decide each time on investment and dividend levels. The firm’s capital stock can be financed by equity and debt, where less solvable firms pay a higher interest rate on debt. Revenue is stochastic.

Keywords: Real options; Optimal control; Capital accumulation (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:102:y:2019:i:c:p:70-80

DOI: 10.1016/j.jedc.2019.04.002

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