Modeling Financing Plan of Holding Companies with approach of reducing Cost of Capital
Subject Areas : Journal of Investment Knowledge
Saeed Khodamoradi
1
(Assistant Professor in Department of Industrial Management, Shahed University)
Mohammad Ebrahim Raei Ezabadi
2
(M.A in Financial management, Shahed University (corresponding author))
Keywords: Financing Plan, Internal Capital Markets, linear goal programming, Holding Companies, Cost of Capital,
Abstract :
The financing plan of subsidiaries for reducing cost of capital is one of the main concerns of multi-business enterprises' managers. Internal capital markets and debts financing through banks are two main methods of financing the operations in the holding companies. The efficient use of internal capital market also represents the realization of financial synergy. In this study, after determining the interdependences between the criteria affecting the choice of the financing methods using DEMATEL technique, the analytic network process (ANP) was used to prioritize the criteria and financing methods. Finally, the linear goal programming was utilized to design an effective mechanism for quantifying the optimal use of each of these alternatives besides considering the policies and operational constraints of holding in one of multi-business firms listed in the Tehran Stock Exchange. After solving the model using LINGO software, the results indicated its high effect on reducing the weighted average cost of capital (WACC) and increasing the use of internal relationships network in financing plan. This model, for the first time, solved financing plan problem in multi business enterprises and it could be extended.
