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Received: 2007-02-27

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Journal of Zhejiang University SCIENCE A 2007 Vol.8 No.6 P.932-938


Optimal restructuring strategies under various dynamic factors

Author(s):  MENG Qing-xuan

Affiliation(s):  Department of Management Science and Engineering, Stanford University, CA 94305, USA; more

Corresponding email(s):   mengqingxuan@vip.sina.com

Key Words:  Restructuring, Capital structure, Financial decisions

MENG Qing-xuan. Optimal restructuring strategies under various dynamic factors[J]. Journal of Zhejiang University Science A, 2007, 8(6): 932-938.

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author="MENG Qing-xuan",
journal="Journal of Zhejiang University Science A",
publisher="Zhejiang University Press & Springer",

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%I Zhejiang University Press & Springer
%DOI 10.1631/jzus.2007.A0932

T1 - Optimal restructuring strategies under various dynamic factors
A1 - MENG Qing-xuan
J0 - Journal of Zhejiang University Science A
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PB - Zhejiang University Press & Springer
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DOI - 10.1631/jzus.2007.A0932

Corporate restructuring was identified as a new industrial force that has great impact on economic values and that therefore has become central in daily financial decision making. This article investigates the optimal restructuring strategies under different dynamic factors and their numerous impacts on firm value. The concept of quasi-leverage is introduced and valuation models are built for corporate debt and equity under imperfect market conditions. The model’s input variables include the quasi-leverage and other firm-specific parameters, the output variables include multiple corporate security values. The restructuring cost is formulated in the form of exponential function, which allows us to observe the sensitivity of the variation in security values. The unified model and its analytical solution developed in this research allow us to examine the continuous changes of security values by dynamically changing the coupon rates, riskless interest rate, bankruptcy cost, quasi-leverage, personal tax rate, corporate taxes rate, transaction cost, firm risk, etc., so that the solutions provide useful guidance for financing and restructuring decisions.

Darkslateblue:Affiliate; Royal Blue:Author; Turquoise:Article


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