The optimal capital structure and the credit risk effect

Nowadays, company market value maximization is the primary goal of nearly every company. Hence companies face many challenges to achieve this goal. One of them is to optimize the capital structure. Selection of the appropriate capital structure (i.e. selection between financing by equity, debt or combination of them) is one of the most difficult managerial decisions and it should take into account two aspects of debt financing: tax benefits (tax shield) and the existence of financial distress or bankruptcy. These aspects are linked by the trade-off theory of capital structure. This contribution is dedicated to the credit risk models dealing with this issue and also to the analysis of their advantages and disadvantages.