Optimization of capital structure in real estate enterprises

Hong Zhang; Fei Yang

doi:10.3934/jimo.2015.11.969

Article Contents

2015, Volume 11, Issue 3: 969-983. Doi: 10.3934/jimo.2015.11.969

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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

Received: October 31, 2013

Revised: May 31, 2014

Published: June 2015

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Abstract

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.

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Mathematics Subject Classification: 91G50.

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