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Practical Applications of Capital Structure Models
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Practical Applications of Capital Structure Models

A special issue of International Journal of Financial Studies (ISSN 2227-7072).

Deadline for manuscript submissions: closed (1 January 2021) | Viewed by 2979

Special Issue Editor

Prof. Dr. Rob Hull

E-Mail Website
Guest Editor
Department of Finance, School of Business, Washburn University, Topeka, KS 66621, USA
Interests: corporate finance; capital structure; equity offerings; hedge funds; financial education; personal finance; retirement planning
Special Issues, Collections and Topics in MDPI journals

Special Issue Information

Dear Colleagues,

Corporate finance often fails to address real-world problems such as federal tax policy or inequity in the taxation of different ownership forms. To elaborate, capital structure theory fails to fully address how maximizing firm value can also simultaneously maximize federal tax revenue or how inequity in taxation affects firm valuation. This Special Issue seeks two general types of research. First, we seek to solicit valuation models built on capital structure theory that compute a maximum firm value for the two major ownership types of pass-through entities (where all taxes are paid at the personal level) and C corporations (where taxes are paid at both the corporate level and personal level). Second, this Special Issue aims to attract articles that apply extant or new capital structure models to financial problems. Besides applications of capital structure theory to maximize federal tax policy and firm value related to inequity in taxing ownership forms, researchers are free to apply a capital structure model to other practical problems of interest.

Prof. Dr. Rob Hull
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. International Journal of Financial Studies is an international peer-reviewed open access quarterly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1800 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Published Papers (1 paper)

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Research

43 pages, 2293 KiB  
Article
Nonprofits and Pass-Throughs: Performance Comparison
by Robert Hull and Shane Van Dalsem
Int. J. Financial Stud. 2021, 9(1), 13; https://0-doi-org.brum.beds.ac.uk/10.3390/ijfs9010013 - 27 Feb 2021
Cited by 2 | Viewed by 2451
Abstract
This paper’s purpose is to compare nonprofits with pass-throughs in terms of valuation, leverage, and growth. To achieve this purpose, we use the Capital Structure Model. This model determines maximum firm valuation through incorporating real data (tax rates, credit spreads, and historical growth [...] Read more.
This paper’s purpose is to compare nonprofits with pass-throughs in terms of valuation, leverage, and growth. To achieve this purpose, we use the Capital Structure Model. This model determines maximum firm valuation through incorporating real data (tax rates, credit spreads, and historical growth rates). Since this is the first study to offer our particular set results on valuation, leverage and growth, our findings are value-additive in terms of the comparative research on nonprofits and pass-throughs. The new and scientific value of our findings are further established by robust tests that modify values for key variables. Major findings include the following. Nonprofits have over a fifty percent valuation advantage over pass-throughs and achieve a four times greater increase in dollar value when going from nongrowth to growth. The latter accomplishments are attained with a smaller before-tax plowback ratio and less retained earnings. Such achievements occur because nonprofits are not taxed on earnings retained for growth. While nonprofits have somewhat greater optimal leverage ratios than pass-throughs, they gain a bit less in dollars added from debt unless growth rates increase as projected when tax rates are lowered. Nonprofits gain less percentage-wise from debt because their unlevered firm value is greater than pass-throughs. Full article
(This article belongs to the Special Issue Practical Applications of Capital Structure Models)
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