The Analysis of Capital Structure
Based on Two Hypothetical Firms
These authors contributed equally.
- 10.2991/assehr.k.211209.537How to use a DOI?
- Gordon growth model; WACC; Modigliani-Miller propositions; arbitrage opportunity; capital structure
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.
- © 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 - 10.2991/assehr.k.211209.537 ID - Wang2021 ER -