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

Optimization of capital structure in real estate enterprises

Hong Zhang 1, and  Fei Yang 1,

1. 

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

Received  November 2013 Revised  June 2014 Published  October 2014

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
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show all references

References:
[1]

Review of financial studies, 25 (2012), 797-837. doi: 10.1093/rfs/hhr103.  Google Scholar

[2]

The Journal of Finance, 53 (1998), 1443-1493. doi: 10.3386/w6145.  Google Scholar

[3]

Annals of Finance, 9 (2013), 337-364. doi: 10.1007/s10436-012-0188-z.  Google Scholar

[4]

The journal of political economy, 81 (1973), 637-654. doi: 10.1086/260062.  Google Scholar

[5]

Mathematical Finance, 19 (2009), 343-378. doi: 10.1111/j.1467-9965.2009.00375.x.  Google Scholar

[6]

Journal of Financial Economics, 106 (2012), 411-426. doi: 10.1016/j.jfineco.2012.05.010.  Google Scholar

[7]

Journal of Corporate Finance, 16 (2010), 73-87. doi: 10.1016/j.jcorpfin.2009.02.003.  Google Scholar

[8]

Journal of Financial Economics, 79 (2006), 469-506. doi: 10.1016/j.jfineco.2005.03.004.  Google Scholar

[9]

Journal of Financial and Quantitative Analysis, 23 (1988), 27-38. doi: 10.2307/2331022.  Google Scholar

[10]

The theory and practice of finance and economics, 168 (2010), 67-71. (in Chinese) Google Scholar

[11]

Journal of Banking & Finance, 29 (2005), 1405-1428. doi: 10.1016/j.jbankfin.2004.05.036.  Google Scholar

[12]

The Journal of Finance, 67 (2012), 803-848. doi: 10.2139/ssrn.1106164.  Google Scholar

[13]

Journal of Financial Economics, 103 (2012), 88-112. Google Scholar

[14]

Journal of Financial and Quantitative Analysis, 1 (1966), 1-35. doi: 10.2307/2329989.  Google Scholar

[15]

Journal of Corporate Finance, 22 (2013), 254-277. doi: 10.2139/ssrn.1732870.  Google Scholar

[16]

Research on financial and economic issues, 187 (1999), 22-27. (in Chinese) Google Scholar

[17]

Accounting Research, (2009), 47-55. (in Chinese) Google Scholar

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