毕业论文外文翻译优化资本结构思考经济和其他价值.docx

1、毕业论文外文翻译优化资本结构思考经济和其他价值Optimal Capital Structure: Reflections on economic and other values By Marc Schauten & Jaap Spronk1 1. Introduction Despite a vast literature on the capital structure of the firm (see Harris and Raviv, 1991, Graham and Harvey, 2001, Brav et al., 2005, for overviews) there stil

2、l is a big gap between theory and practice (see e.g. Cools, 1993, Tempelaar, 1991, Boot & Cools, 1997). Starting with the seminal work by Modigliani & Miller (1958, 1963), much attention has been paid to the optimality of capital structure from the shareholders point of view. Over the last few decad

3、es studies have been produced on the effect of other stakeholders interests on capital structure. Well-known examples are the interests of customers who receive product or service guarantees from the company (see e.g. Grinblatt & Titman, 2002). Another area that has received considerable attention i

4、s the relation between managerial incentives and capital structure (Ibid.). Furthermore, the issue of corporate control2 (see Jensen & Ruback, 1983) and, related, the issue of corporate governance3 (see Shleifer & Vishney, 1997), receive a lions part of the more recent academic attention for capital

5、 structure decisions. From all these studies, one thing is clear: The capital structure decision (or rather, the management of the capital structure over time) involves more issues than the maximization of the firms market value alone. In this paper, we give an overview of the different objectives a

6、nd considerations that have been proposed in the literature. We make a distinction between two broadly defined situations. The first is the traditional case of the firm that strives for the maximization of the value of the shares for the current shareholders. Whenever other considerations than value

7、 maximization enter capital structure decisions, these considerations have to be instrumental to the goal of value maximization. The second case concerns the firm that explicitly chooses for more objectives than value maximization alone. This may be because the shareholders adopt a multiple stakehol

8、ders approach or because of a different ownership structure than the usual corporate structure dominating finance literature. An example of the latter is the co-operation, a legal entity which can be found in a.o. many European countries. For a discussion on why firms are facing multiple goals, we r

9、efer to Hallerbach and Spronk (2002a, 2002b). In Section 2 we will describe objectives and considerations that, directly or indirectly, clearly help to create and maintain a capital structure which is optimal for the value maximizing firm. The third section describes other objectives and considerati

10、ons. Some of these may have a clear negative effect on economic value, others may be neutral and in some cases the effect on economic value is not always completely clear. Section 4 shows how, for both cases, capital structure decisions can be framed as multiple criteria decision problems which can

11、then benefit from multiple criteria decision support tools that are now widely available. 2. Maximizing shareholder value According to the neoclassical view on the role of the firm, the firm has one single objective: maximization of shareholder value. Shareholders possess the property rights of the

12、firm and are thus entitled to decide what the firm should aim for. Since shareholders only have one objective in mind - wealth maximization - the goal of the firm is maximization of the firms contribution to the financial wealth of its shareholders. The firm can accomplish this by investing in proje

13、cts with positive net present value4. Part of shareholder value is determined by the corporate financing decision5. Two theories about the capital structure of the firm - the trade-off theory and the pecking order theory - assume shareholder wealth maximization as the one and only corporate objectiv

14、e. We will discuss both theories including several market value related extensions. Based on this discussion we formulate a list of criteria that is relevant for the corporate financing decision in this essentially neoclassical view. The original proposition I of Miller and Modigliani (1958) states

15、that in a perfect capital market the equilibrium market value of a firm is independent of its capital structure, i.e. the debt-equity ratio6. If proposition I does not hold then arbitrage will take place. Investors will buy shares of the undervalued firm and sell shares of the overvalued shares in s

16、uch a way that identical income streams are obtained. As investors exploit these arbitrage opportunities, the price of the overvalued shares will fall and that of the undervalued shares will rise, until both prices are equal. When corporate taxes are introduced, proposition I changes dramatically. M

17、iller and Modigliani (1958, 1963) show that in a world with corporate tax the value of firms is a.o. a function of leverage. When interest payments become tax deductible and payments to shareholders are not, the capital structure that maximizes firm value involves a hundred percent debt financing. B

18、y increasing leverage, the payments to the government are reduced with a higher cash flow for the providers of capital as a result. The difference between the present value of the taxes paid by an unlevered firm (Gu) and an identical levered firm (Gl) is the present value of tax shields (PVTS). Figu

19、re 1 depicts the total value of an unlevered and a levered firm7. The higher leverage, the lower Gl, the higher Gu - Gl (=PVTS). In the traditional trade-off models of optimal capital structure it is assumed that firms balance the marginal present value of interest tax shields8 against marginal dire

20、ct costs of financial distress or direct bankruptcy costs.9 Additional factors can be included in this trade-off framework. Other costs than direct costs of financial distress are agency costs of debt (Jensen & Meckling, 1976). Often cited examples of agency costs of debt are the underinvestment pro

21、blem (Myers, 1977)10, the asset substitution problem (Jensen & Meckling, 1976 and Galai & Masulis, 1976), the play for time game by managers, the unexpected increase of leverage (combined with an equivalent pay out to stockholders to make to increase the impact), the refusal to contribute equity cap

22、ital and the cash in and run game (Brealey, Myers & Allan, 2006). These problems are caused by the difference of interest between equity and debt holders and could be seen as part of the indirect costs of financial distress. Another benefit of debt is the reduction of agency costs between managers a

23、nd external equity (Jensen and Meckling, 1976, Jensen, 1986, 1989). Jensen en Meckling (1976) argue that debt, by allowing larger managerial residual claims because the need for external equity is reduced by the use of debt, increases managerial effort to work. In addition, Jensen (1986) argues that

24、 high leverage reduces free cash with less resources to waste on unprofitable investments as a result.11 The agency costs between management and external equity are often left out the trade-off theory since it assumes managers not acting on behalf of the shareholders (only) which is an assumption of

25、 the traditional trade-off theory. In Myers (1984) and Myers and Majlufs (1984) pecking order model12 there is no optimal capital structure. Instead, because of asymmetric information and signalling problems associated with external financing13, firms financing policies follow a hierarchy, with a pr

26、eference for internal over external finance, and for debt over equity. A strict interpretation of this model suggests that firms do not aim at a target debt ratio. Instead, the debt ratio is just the cumulative result of hierarchical financing over time. (See Shyum-Sunder & Myers, 1999.) Original ex

27、amples of signalling models are the models of Ross (1977) and Leland and Pyle (1977). Ross (1977) suggests that higher financial leverage can be used by managers to signal an optimistic future for the firm and that these signals cannot be mimicked by unsuccessful firms14. Leland and Pyle (1977) focu

28、s on owners instead of managers. They assume that entrepreneurs have better information on the expected cash flows than outsiders have. The inside information held by an entrepreneur can be transferred to suppliers of capital because it is in the owners interest to invest a greater fraction of his w

29、ealth in successful projects. Thus the owners willingness to invest in his own projects can serve as a signal of project quality. The value of the firm increases with the percentage of equity held by the entrepreneur relative to the percentage he would have held in case of a lower quality project. (

30、Copeland, Weston & Shastri, 2005.) The stakeholder theory formulated by Grinblatt & Titman (2002)15 suggests that the way in which a firm and its non-financial stakeholders interact is an important determinant of the firms optimal capital structure. Non-financial stakeholders are those parties other

31、 than the debt and equity holders. Non-financial stakeholders include firms customers, employees, suppliers and the overall community in which the firm operates. These stakeholders can be hurt by a firms financial difficulties. For example customers may receive inferior products that are difficult t

32、o service, suppliers may lose business, employees may lose jobs and the economy can be disrupted. Because of the costs they potentially bear in the event of a firms financial distress, non-financial stakeholders will be less interested ceteris paribus in doing business with a firm having a high(er)

33、potential for financial difficulties. This understandable reluctance to do business with a distressed firm creates a cost that can deter a firm from undertaking excessive debt financing even when lenders are willing to provide it on favorable terms (Ibid., p. 598). These considerations by non-financial stakeholders are the cause of their importa