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Optimal Equity Financing of the Corporation

Published online by Cambridge University Press:  19 October 2009

Clement G. Krouse  and
Wayne Y. Lee
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Extract

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.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 8 , Issue 4 , September 1973 , pp. 539 - 563
Copyright
Copyright © School of Business Administration, University of Washington 1973

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