This paper focuses on those structural models with an endogenous default barrier where fims optimally choose a default boundary so as to maximize the equity value. The analysis commences to cover avowedly theoretical frameworks from pioneering works by Black-Scholes (1973) and Merton (1974) on zero-coupon debts to later extensions of those models for a more complex debt structure to include coupon perpetual bonds (Leland, 1994) and of arbitrage maturity or rolledover debts (Leland and Toft, 1996). Furthermore, this paper studies the empirical performance of capital structure models by testing the optimized gearing levels computed from those models with diffrent assumptions. Parameters of these models are estimated from the fims’ equity prices. The novelty of this paper lies in the fact that it is not merely a summary of static theories on capital structure but it is the fist of its kind to empirically study the capital structure choices of Vietnamese real estate fims, with primary focus on static models. This research follows secondary data analysis to investigate market information of stock returns and attempts to examine the potential dissimilarity in actual and proposed optimal gearing levels for the two years 2014 and 2016.
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This paper focuses on those structural models with an endogenous default barrier where fims optimally choose a default boundary so as to maximize the equity value. The analysis commences to cover avowedly theoretical frameworks from pioneering works by Black-Scholes (1973) and Merton (1974) on zero-coupon debts to later extensions of those models for a more complex debt structure to include coupon perpetual bonds (Leland, 1994) and of arbitrage maturity or rolledover debts (Leland and Toft, 1996). Furthermore, this paper studies the empirical performance of capital structure models by testing the optimized gearing levels computed from those models with diffrent assumptions. Parameters of these models are estimated from the fims’ equity prices. The novelty of this paper lies in the fact that it is not merely a summary of static theories on capital structure but it is the fist of its kind to empirically study the capital structure choices of Vietnamese real estate fims, with primary focus on static models. This research follows secondary data analysis to investigate market information of stock returns and attempts to examine the potential dissimilarity in actual and proposed optimal gearing levels for the two years 2014 and 2016.
