Optimal capital structure with an equity-for-guarantee swap

Zhaojun Yang; Hai Zhang

doi:10.1016/j.econlet.2012.11.023

Optimal capital structure with an equity-for-guarantee swap

Zhaojun Yang, Hai Zhang

Research output: Contribution to journal › Article › peer-review

30 Citations (Scopus)

Abstract

This paper finds that a newly created equity-for-guarantee swap can significantly increase a firm’s value. If the firm earns more/less in a recession/boom market, the guarantee cost will decrease. The greater the business risk is, the more the guarantee cost will decrease and the higher the leverage ratio will be.

Original language	English
Pages (from-to)	355-359
Number of pages	5
Journal	Economic Letters
Volume	118
Issue number	2
Early online date	5 Dec 2012
DOIs	https://doi.org/10.1016/j.econlet.2012.11.023
Publication status	Published - 28 Feb 2013
Externally published	Yes

Keywords

equity-for-guarantee swap
capital structure
guarantee cost

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10.1016/j.econlet.2012.11.023

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AB - This paper finds that a newly created equity-for-guarantee swap can significantly increase a firm’s value. If the firm earns more/less in a recession/boom market, the guarantee cost will decrease. The greater the business risk is, the more the guarantee cost will decrease and the higher the leverage ratio will be.

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Optimal capital structure with an equity-for-guarantee swap

Abstract

Keywords

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