Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021)

The Analysis of Capital Structure

Based on Two Hypothetical Firms

Authors
Ziwei Wang1, , *, Yifei Huang2, , *
1Faculty of Business and Economics, University of Melbourne, Victoria 3010, Australia
2School of Management Science and Real Estate, Chongqing University, Chongqing 400044, China

These authors contributed equally.

Corresponding Authors
Ziwei Wang, Yifei Huang
Available Online 15 December 2021.
DOI
https://doi.org/10.2991/assehr.k.211209.537How to use a DOI?
Keywords
Gordon growth model; WACC; Modigliani-Miller propositions; arbitrage opportunity; capital structure
Abstract

A corporate’s financing of its real investments has recently attracted considerable attention from academics who have proposed various theories. This paper firstly studies the Gordon growth model and the weighted average cost of capital formula with the empirical tests and the sensitivity analysis. Then, we exam changes in a company’s market value concerning different combinations of capital structures and identify an arbitrage opportunity based on the Modigliani-Miller propositions. Finally, we investigate the relationship between a firm’s funding sources and its profit using panel data regression to figure out the optimal way to financing. These studies enable us to realize the fundamental relationship between a corporate’s price and its capital structure. In light of those studies, we could have some insightful ideas regarding funding decision-making in reality.

Copyright
© 2021 The Authors. Published by Atlantis Press International B.V.
Open Access
This is an open access article under the CC BY-NC license.

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Volume Title
Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021)
Series
Advances in Economics, Business and Management Research
Publication Date
15 December 2021
ISBN
978-94-6239-483-4
ISSN
2352-5428
DOI
https://doi.org/10.2991/assehr.k.211209.537How to use a DOI?
Copyright
© 2021 The Authors. Published by Atlantis Press International B.V.
Open Access
This is an open access article under the CC BY-NC license.

Cite this article

TY  - CONF
AU  - Ziwei Wang
AU  - Yifei Huang
PY  - 2021
DA  - 2021/12/15
TI  - The Analysis of Capital Structure
BT  - Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021)
PB  - Atlantis Press
SP  - 3290
EP  - 3298
SN  - 2352-5428
UR  - https://doi.org/10.2991/assehr.k.211209.537
DO  - https://doi.org/10.2991/assehr.k.211209.537
ID  - Wang2021
ER  -