A system dynamics model of capital structure policy for firm value maximization

Bibliographic Data

ID21652097
AuthorsAima Khan (0000-0002-7059-6474, System Dynamics Group, Department of Geography University of Bergen Bergen Norway, corresponding author), Muhammad Azeem Qureshi (0000-0001-5107-2192, School of Business Oslo Metropolitan University Oslo Norway), Pål Ingebrigt Davidsen (Department of Geography University of Bergen Bergen Norway)
Year2021
Volume38
Issue4
Pages503-516
Publication date2021-08-01
Open AccessYes
TypeARTICLE
VenueSystems Research and Behavioral Science (JOURNAL)
Journal identifiersISSN: 1092-7026 • E-ISSN: 1099-1743
PublisherWiley (PUBLISHER • GB)
DOI10.1002/sres.2693
OpenAlexW3042863054
LanguageEN
Citations received2
References cited25

The complexity surrounding the maximization of firm value agenda demands a comprehensive causal model that effectively embeds the intertwining relationships of the variables and the policies involved. System dynamics provides an appropriate methodology to model and simulate such complex relationships to facilitate decision making in a complex business environment. The objective of the study is to analyze the impact of capital structure policy, being a key managerial decision, on the firm value. For this purpose, the study develops a system dynamics‐based corporate planning model for an oil firm, including the operational as well as financial processes. Various scenarios and capital structure policies have been designed and simulated to identify the policy that helps in increasing the firm value. The results demonstrate that increase in debt percentage in capital structure mix increase the firm value

Business · Capital structure · Debt · Economics · Enterprise value · Industrial organization · Maximization · Microeconomics · System dynamics · Capital Investment and Risk Analysis · Computer Science · Corporate Finance and Governance · Private Equity and Venture Capital · Finance

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Open DOIOpen Access