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The decision‐making of optimal equity and capital structure based on dynamical risk profiles: A Langevin system framework for SME growth
Author(s) -
Li Xia,
Chen Kehan,
Yuan George Xianzhi,
Wang Huiqi
Publication year - 2021
Publication title -
international journal of intelligent systems
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.291
H-Index - 87
eISSN - 1098-111X
pISSN - 0884-8173
DOI - 10.1002/int.22424
Subject(s) - equity (law) , capital structure , leverage (statistics) , risk management , dynamical systems theory , econometrics , computer science , risk analysis (engineering) , microeconomics , economics , business , finance , physics , machine learning , debt , political science , law , quantum mechanics
The purpose of this paper is to establish a generalized dynamical framework for small and micro‐enterprise (SME) growth in the tech‐economic paradigm, and develop a novel quantitative method for the decision‐making of optimal equity and capital structure under the measurement of dynamical risk profiles. Based on the numerical simulations in different scenarios, we systematically study the dependence of SME growth performance on various factors, including capital structure, investment preference, and internal risk level, and find that dynamical optimal equity structure always corresponds to the better performance on value at response risks, and significantly reduces the bilateral cooperative risk at the inconspicuous cost of systematic response risk. Moreover, it is also observed that SME state behaves some important nonmonotonous features, such as stochastic resonance with internal risk level, generalized stochastic resonance with operating capital leverage. These results will provide the latent support for SMEs to create useful decision rules in capital optimization, risk management, and growth path regulation.