Analyses of optimal government capital structure generally follow Bohn (1990) and Barro (1995) in assuming risk neutrality or an exogenous risk premium. These analyses usually conclude that the optimal government capital structure stabilizes tax rates over time and states of nature to the greatest extent possible, something known as “tax smoothing.” In this paper, we show that when an endogenou...

With the reform of our property rights system, the maturity of the capital market, and the diversification of corporate financing, the capital structure decision has become the major concern of financial management. There are numbers of researches on how to determine the optimal capital structure, what factors affect the capital structure and what the relationship is like between the capital st...

In this paper, we show that although ex ante equityholders would like to adopt an optimal displacement and operating policy, they may not have incentives to implement such a policy ex post when the manager acquires firmspecific human capital and becomes indispensable to the firm’s continued operation. An optimal mix of debt and equity can serve as a commitment device in disciplining the manager...