Pecking order as a dynamic leverage theory
| Autor: | Dilip K. Ghosh, Uzi Yaari, Charles Bagley |
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| Rok vydání: | 1998 |
| Předmět: | |
| Zdroj: | The European Journal of Finance. 4:157-183 |
| ISSN: | 1466-4364 1351-847X |
| DOI: | 10.1080/135184798337362 |
| Popis: | Static tradeoff theories, which do not explicitly treat the impact of transaction costs, do not explain the policy of asymmetry between frequent small debt transactions and infrequent large equity transactions. Nor do these theories explain why the debt ratio is allowed to wander a considerable distance from its alleged static optimum, or how much of a distance should be tolerated. We offer a class of diffusion models that mimic this behaviour in a stochastic-dynamic framework and are designed to optimize a financing strategy using any static tradeoff theory as input. The models developed reveal the determinants of the size and frequency of equity transactions and the range of values over which leverage variations are tolerated in four generic scenarios. They also yield a new formulation of the cost of capital that recognizes stochastic transaction costs and a penalty for deviation from any static-optimal leverage. Our class of models augments the pecking order theory, provides a flexible quantitative fra... |
| Databáze: | OpenAIRE |
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