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Capital structure optimization: a model of optimal capital structure from the aspect of capital cost and corporate value

Economic research - Ekonomska istraživanja, 2023-07, Vol.36 (2)

2022 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group. 2022 ;2022 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group. This work is licensed under the Creative Commons Attribution License http://creativecommons.org/licenses/by/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;ISSN: 1331-677X ;EISSN: 1848-9664 ;DOI: 10.1080/1331677X.2022.2147565

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  • Title:
    Capital structure optimization: a model of optimal capital structure from the aspect of capital cost and corporate value
  • Author: Kontuš, Eleonora ; Šorić, Kristina ; Šarlija, Nataša
  • Subjects: a model of optimal capital structure ; Capital costs ; Capital structure ; corporate value ; Economic theory ; Long term debt ; optimal capital structure ; Optimization ; The effective cost of capital ; the overall cost of capital ; Value
  • Is Part Of: Economic research - Ekonomska istraživanja, 2023-07, Vol.36 (2)
  • Description: The purpose of this study is, firstly, to examine capital structure optimization and secondly, to provide a framework for determining the optimal capital structure from the aspect of capital cost and corporate value. The results of our work provide an innovative model for arriving at a company's optimal capital structure based on the estimation of the effective cost of capital and the determination of the shares of new equity and long-term debt that will both minimize the overall cost of capital and maximize its value. The model can be applied for quantitative estimates of optimal capital structure. This paper contributes to the literature by applying mathematical modeling and mathematical theory of optimization to solve the problem of capital structure optimization, and by providing a framework for determining optimal capital structure. The scientific contribution of this research is development of a model of optimal capital structure from the aspect of capital cost and corporate value, and new equations for calculating the effective costs of long-term financing sources. This model provides explicit advice on optimal long-term debt and equity level and can be applied to produce a firm-specific recommendation about optimal capital structure that a given company should use.
  • Publisher: Pula: Routledge
  • Language: English
  • Identifier: ISSN: 1331-677X
    EISSN: 1848-9664
    DOI: 10.1080/1331677X.2022.2147565
  • Source: Taylor & Francis Open Access
    ProQuest Central
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