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Risk, Preference, Capital Structure and Incentives

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  • Zhongwei Wu

Abstract

Using the surplus theory of the firm, we examine capital and labor as inputs of a surplus generating firm, and study the capital structure of the firm. We derive two equilibrium models on: (a) the capital structure and ownership of the firm and (b) alternative incentive compensation structures. Within the framework of the firm as a cooperative surplus generating enterprise, we introduce the concepts of risk, preference and resource constraints, to provide a framework for analyzing more sophisticated methods of dividing the risks and rewards of the firm’s surplus.

Suggested Citation

  • Zhongwei Wu, 2018. "Risk, Preference, Capital Structure and Incentives," International Business Research, Canadian Center of Science and Education, vol. 11(7), pages 20-34, July.
    • Handle: RePEc:ibn:ibrjnl:v:11:y:2018:i:7:p:20-34
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    firm; risk; preference; capital structure; incentives;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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