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Optimal Equity Financing of the Corporation

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  • Krouse, Clement G.
  • Lee, Wayne Y.

Abstract

Considerable literature in the investment, growth, and financing of the corporation has developed in recent years. While theoretical studies in this area have contributed importantly to the understanding of the firm's time-optimal decision program, they have generally been limited in scope to the all-internally-funded firm and steady-state dynamics. The well-known analyses of Gordon ]7[ and Lintner ]13[ are typical of this restricted focus. Herein we relax these specializing conditions, both by permitting external equity as a financing alternative and by not a priori requiring the firm to make identical (earnings proportional) investment and financing decisions at every time instant such that it progresses only along a constant, exponentially growing earnings path.

Suggested Citation

  • Krouse, Clement G. & Lee, Wayne Y., 1973. "Optimal Equity Financing of the Corporation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 8(4), pages 539-563, September.
    • Handle: RePEc:cup:jfinqa:v:8:y:1973:i:04:p:539-563_01
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    Cited by:

    1. Roy Cerqueti, 2012. "Financing policies via stochastic control: a dynamic programming approach," Journal of Global Optimization, Springer, vol. 53(3), pages 539-561, July.

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