We model a risk-averse firm owner who wants to maximize the intertemporal expected utility of firm’s dividends. The optimal dynamic control problem is characterized by two stochastic state variables: the equity value, and profitability (ROA) of the _rm. According to the empirical evidence, we...

We model a risk-averse firm owner who wants to maximize the intertemporal expected utility of firm’s dividends. The optimal dynamic control problem is characterized by two stochastic state variables: the equity value, and profitability (ROA) of the _rm. According to the empirical evidence, we...

We model a risk-averse firm owner who wants to maximize the inter-temporal expected utility of firm's dividends. The optimal dynamic control problem is characterized by two stochastic state variables: the equity value, and profitability (ROA) of the firm. According to the empirical evidence, we...

We extend Trade-Off Theory (TOT) by assuming that EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), rather than EBIT (Earnings Before Interest and Taxes), follows a Geometric Brownian Motion (GBM), and we thus consider the role of tax depreciation allowances (TDA) in...