Optimization of capital structure in real estate enterprises

Previous Article
Two approaches for solving mathematical programs with second-order cone complementarity constraints
JIMO Home
This Issue
Next Article
Electricity day-ahead markets: Computation of Nash equilibria

2015, 11(3): 969-983. doi: 10.3934/jimo.2015.11.969

Optimization of capital structure in real estate enterprises

1.	Institute of Real Estate Research, Tsinghua University, Beijing, 100084, China, China

Received November 2013 Revised June 2014 Published October 2014

Abstract
Related Papers

On the basis of capital structure theory and the option pricing model, the revenues and costs of debts are quantified. Combining with the financing characteristics of real estate enterprises, a mathematical model in consideration of the effect of interest-free debt was established in this paper to determine the optimal capital structure of real estate enterprises, and then a simulation analysis was conducted. The results indicated that the interest-bearing debt interest rate, the tax rate, the risk-free interest rate and the proportion of interest-bearing debt are all positively correlated with the optimal debt ratio of real estate enterprises, the annual average growth rate of housing price and the annual volatility of enterprise assets are negatively correlated with that, and as the debt maturity increases, the optimal debt ratio of real estate enterprises will decrease.

Keywords: capital structure, real estate enterprises, interest-free debt, Optimization, interest-bearing debt, simulation analysis..

Mathematics Subject Classification: 91G5.

Citation: Hong Zhang, Fei Yang. Optimization of capital structure in real estate enterprises. Journal of Industrial & Management Optimization, 2015, 11 (3) : 969-983. doi: 10.3934/jimo.2015.11.969

References:

[1]	R. Anderson and A. Carverhill, Corporate liquidity and capital structure,, Review of financial studies, 25 (2012), 797. doi: 10.1093/rfs/hhr103.
[2]	G. Andrade and S. N. Kaplan, How costly is financial (not economic) distress? Evidence from highly leveraged transactions that became distressed,, The Journal of Finance, 53 (1998), 1443. doi: 10.3386/w6145.
[3]	E. Barucci and L. Del Viva, Dynamic capital structure and the contingent capital option,, Annals of Finance, 9 (2013), 337. doi: 10.1007/s10436-012-0188-z.
[4]	F. Black and M. Scholes, The pricing of options and corporate liabilities,, The journal of political economy, 81 (1973), 637. doi: 10.1086/260062.
[5]	N. Chen and S. G. Kou, Credit spreads, optimal capital structure, and implied volatility with endogenous default and jump risk,, Mathematical Finance, 19 (2009), 343. doi: 10.1111/j.1467-9965.2009.00375.x.
[6]	Y. Chu, Optimal capital structure, bargaining, and the supplier market structure,, Journal of Financial Economics, 106* (2012), 411. doi: 10.1016/j.jfineco.2012.05.010.*
[7]	D. O. Cook and T. Tang, Macroeconomic conditions and capital structure adjustment speed,, Journal of Corporate Finance, 16 (2010), 73. doi: 10.1016/j.jcorpfin.2009.02.003.
[8]	M. J. Flannery and K. P. Rangan, Partial adjustment toward target capital structures,, Journal of Financial Economics, 79 (2006), 469. doi: 10.1016/j.jfineco.2005.03.004.
[9]	R. A. Haugen, and L. W. Senbet, Bankruptcy and agency costs: Their significance to the theory of optimal capital structure,, Journal of Financial and Quantitative Analysis, 23 (1988), 27. doi: 10.2307/2331022.
[10]	W. Jin, W. Zhang, B. Zhou and X. Xiong, Dynamic capital structure of the real estate companies in China,, The theory and practice of finance and economics, 168 (2010), 67.
[11]	D. C. Mauer and S. Sarkar, Real options, agency conflicts, and optimal capital structure,, Journal of Banking & Finance, 29 (2005), 1405. doi: 10.1016/j.jbankfin.2004.05.036.
[12]	E. Morellec, B. Nikolov and N. Schürhoff, Corporate governance and capital structure dynamics,, The Journal of Finance, 67 (2012), 803. doi: 10.2139/ssrn.1106164.
[13]	Ö. Öztekin and M. J. Flannery, Institutional determinants of capital structure adjustment speeds,, Journal of Financial Economics, 103* (2012), 88.*
[14]	A. A. Robichek and S. C. Myers, Problems in the theory of optimal capital structure,, Journal of Financial and Quantitative Analysis, 1 (1966), 1. doi: 10.2307/2329989.
[15]	B. Yang, Dynamic capital structure with heterogeneous beliefs and market timing,, Journal of Corporate Finance, 22 (2013), 254. doi: 10.2139/ssrn.1732870.
[16]	Z. Zhang, The value of debt guarantee,, Research on financial and economic issues, 187* (1999), 22.*
[17]	Z. Zhang and S. Xiao, Tax shield, bankruptcy cost and the optimal capital structure,, Accounting Research, (2009), 47.

show all references

References:

[1]	R. Anderson and A. Carverhill, Corporate liquidity and capital structure,, Review of financial studies, 25 (2012), 797. doi: 10.1093/rfs/hhr103.
[2]	G. Andrade and S. N. Kaplan, How costly is financial (not economic) distress? Evidence from highly leveraged transactions that became distressed,, The Journal of Finance, 53 (1998), 1443. doi: 10.3386/w6145.
[3]	E. Barucci and L. Del Viva, Dynamic capital structure and the contingent capital option,, Annals of Finance, 9 (2013), 337. doi: 10.1007/s10436-012-0188-z.
[4]	F. Black and M. Scholes, The pricing of options and corporate liabilities,, The journal of political economy, 81 (1973), 637. doi: 10.1086/260062.
[5]	N. Chen and S. G. Kou, Credit spreads, optimal capital structure, and implied volatility with endogenous default and jump risk,, Mathematical Finance, 19 (2009), 343. doi: 10.1111/j.1467-9965.2009.00375.x.
[6]	Y. Chu, Optimal capital structure, bargaining, and the supplier market structure,, Journal of Financial Economics, 106* (2012), 411. doi: 10.1016/j.jfineco.2012.05.010.*
[7]	D. O. Cook and T. Tang, Macroeconomic conditions and capital structure adjustment speed,, Journal of Corporate Finance, 16 (2010), 73. doi: 10.1016/j.jcorpfin.2009.02.003.
[8]	M. J. Flannery and K. P. Rangan, Partial adjustment toward target capital structures,, Journal of Financial Economics, 79 (2006), 469. doi: 10.1016/j.jfineco.2005.03.004.
[9]	R. A. Haugen, and L. W. Senbet, Bankruptcy and agency costs: Their significance to the theory of optimal capital structure,, Journal of Financial and Quantitative Analysis, 23 (1988), 27. doi: 10.2307/2331022.
[10]	W. Jin, W. Zhang, B. Zhou and X. Xiong, Dynamic capital structure of the real estate companies in China,, The theory and practice of finance and economics, 168 (2010), 67.
[11]	D. C. Mauer and S. Sarkar, Real options, agency conflicts, and optimal capital structure,, Journal of Banking & Finance, 29 (2005), 1405. doi: 10.1016/j.jbankfin.2004.05.036.
[12]	E. Morellec, B. Nikolov and N. Schürhoff, Corporate governance and capital structure dynamics,, The Journal of Finance, 67 (2012), 803. doi: 10.2139/ssrn.1106164.
[13]	Ö. Öztekin and M. J. Flannery, Institutional determinants of capital structure adjustment speeds,, Journal of Financial Economics, 103* (2012), 88.*
[14]	A. A. Robichek and S. C. Myers, Problems in the theory of optimal capital structure,, Journal of Financial and Quantitative Analysis, 1 (1966), 1. doi: 10.2307/2329989.
[15]	B. Yang, Dynamic capital structure with heterogeneous beliefs and market timing,, Journal of Corporate Finance, 22 (2013), 254. doi: 10.2139/ssrn.1732870.
[16]	Z. Zhang, The value of debt guarantee,, Research on financial and economic issues, 187* (1999), 22.*
[17]	Z. Zhang and S. Xiao, Tax shield, bankruptcy cost and the optimal capital structure,, Accounting Research, (2009), 47.

[1]	Jinying Ma, Honglei Xu. Empirical analysis and optimization of capital structure adjustment. Journal of Industrial & Management Optimization, 2017, 13 (5) : 1-11. doi: 10.3934/jimo.2018191
[2]	Qian Zhao, Zhuo Jin, Jiaqin Wei. Optimal investment and dividend payment strategies with debt management and reinsurance. Journal of Industrial & Management Optimization, 2018, 14 (4) : 1323-1348. doi: 10.3934/jimo.2018009
[3]	Alberto Bressan, Yilun Jiang. The vanishing viscosity limit for a system of H-J equations related to a debt management problem. Discrete & Continuous Dynamical Systems - S, 2018, 11 (5) : 793-824. doi: 10.3934/dcdss.2018050
[4]	Tao Guan, Denghua Zhong, Bingyu Ren, Pu Cheng. Construction schedule optimization for high arch dams based on real-time interactive simulation. Journal of Industrial & Management Optimization, 2015, 11 (4) : 1321-1342. doi: 10.3934/jimo.2015.11.1321
[5]	Jide Sun, Lili Wang. The interaction between BIM's promotion and interest game under information asymmetry. Journal of Industrial & Management Optimization, 2015, 11 (4) : 1301-1319. doi: 10.3934/jimo.2015.11.1301
[6]	Dong liu, Ville Kolehmainen, Samuli Siltanen, Anne-maria Laukkanen, Aku Seppänen. Estimation of conductivity changes in a region of interest with electrical impedance tomography. Inverse Problems & Imaging, 2015, 9 (1) : 211-229. doi: 10.3934/ipi.2015.9.211
[7]	Srdjan Stojanovic. Interest rates risk-premium and shape of the yield curve. Discrete & Continuous Dynamical Systems - B, 2016, 21 (5) : 1603-1615. doi: 10.3934/dcdsb.2016013
[8]	Weiwei Wang, Ping Chen. A mean-reverting currency model with floating interest rates in uncertain environment. Journal of Industrial & Management Optimization, 2017, 13 (5) : 1-16. doi: 10.3934/jimo.2018129
[9]	Rolf Rannacher. A short course on numerical simulation of viscous flow: Discretization, optimization and stability analysis. Discrete & Continuous Dynamical Systems - S, 2012, 5 (6) : 1147-1194. doi: 10.3934/dcdss.2012.5.1147
[10]	Nina Yan, Tingting Tong, Hongyan Dai. Capital-constrained supply chain with multiple decision attributes: Decision optimization and coordination analysis. Journal of Industrial & Management Optimization, 2017, 13 (5) : 1-26. doi: 10.3934/jimo.2018125
[11]	Tien-Yu Lin, Ming-Te Chen, Kuo-Lung Hou. An inventory model for items with imperfect quality and quantity discounts under adjusted screening rate and earned interest. Journal of Industrial & Management Optimization, 2016, 12 (4) : 1333-1347. doi: 10.3934/jimo.2016.12.1333
[12]	Lin Xu, Rongming Wang. Upper bounds for ruin probabilities in an autoregressive risk model with a Markov chain interest rate. Journal of Industrial & Management Optimization, 2006, 2 (2) : 165-175. doi: 10.3934/jimo.2006.2.165
[13]	Julián López-Gómez, Marcela Molina-Meyer, Andrea Tellini. Intricate bifurcation diagrams for a class of one-dimensional superlinear indefinite problems of interest in population dynamics. Conference Publications, 2013, 2013 (special) : 515-524. doi: 10.3934/proc.2013.2013.515
[14]	Haixiang Yao, Zhongfei Li, Yongzeng Lai. Dynamic mean-variance asset allocation with stochastic interest rate and inflation rate. Journal of Industrial & Management Optimization, 2016, 12 (1) : 187-209. doi: 10.3934/jimo.2016.12.187
[15]	Yan Zhang, Yonghong Wu, Benchawan Wiwatanapataphee, Francisca Angkola. Asset liability management for an ordinary insurance system with proportional reinsurance in a CIR stochastic interest rate and Heston stochastic volatility framework. Journal of Industrial & Management Optimization, 2017, 13 (5) : 1-31. doi: 10.3934/jimo.2018141
[16]	Huai-Nian Zhu, Cheng-Ke Zhang, Zhuo Jin. Continuous-time mean-variance asset-liability management with stochastic interest rates and inflation risks. Journal of Industrial & Management Optimization, 2017, 13 (5) : 1-22. doi: 10.3934/jimo.2018180
[17]	María Teresa V. Martínez-Palacios, Adrián Hernández-Del-Valle, Ambrosio Ortiz-Ramírez. On the pricing of Asian options with geometric average of American type with stochastic interest rate: A stochastic optimal control approach. Journal of Dynamics & Games, 2019, 6 (1) : 53-64. doi: 10.3934/jdg.2019004
[18]	Yuri Yatsenko, Natali Hritonenko. Optimization of the lifetime of capital equipment using integral models. Journal of Industrial & Management Optimization, 2005, 1 (4) : 415-432. doi: 10.3934/jimo.2005.1.415
[19]	John V. Shebalin. Theory and simulation of real and ideal magnetohydrodynamic turbulence. Discrete & Continuous Dynamical Systems - B, 2005, 5 (1) : 153-174. doi: 10.3934/dcdsb.2005.5.153
[20]	Sze-Bi Hsu, Cheng-Che Li. A discrete-delayed model with plasmid-bearing, plasmid-free competition in a chemostat. Discrete & Continuous Dynamical Systems - B, 2005, 5 (3) : 699-718. doi: 10.3934/dcdsb.2005.5.699

2017 Impact Factor: 0.994

American Institute of Mathematical Sciences