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Author : Mark Gertler
Publisher :
ISBN 13 :
Total Pages : 64 pages
Book Rating : 4.:/5 (318 download)
Download or read book Taxation, Corporation Capital Structure, and Financial Distress written by Mark Gertler and published by . This book was released on 1989 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Mark Gertler
Publisher :
ISBN 13 :
Total Pages : 48 pages
Book Rating : 4.:/5 (129 download)
Download or read book Taxation, Corporate Capital Structure, and Financial Distress written by Mark Gertler and published by . This book was released on 2008 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: Is corporate leverage excessive? Is the tax code distorting corporate capital structure decisions in a way that increases the possibility of an economic crisis owing to quot;financial instabilityquot;?Answering these kinds of questions first requires some precision in terminology. In this paper, we describe the cases for and against the trend toward high leverage, and evaluate the role played by taxation. While provision of proper incentives to managers may in part underlie the trend to the debt, high leverage may in practice be a blunt way to address the problem, and one which opens up the possibility for undue exposure to the risks of financial distress.Our story takes as given the kinds of managerial incentive problems deemed important by advocates of leverage. We maintain, however, that when a firm is subject to business-cycle risk as well as individual risk, a profit maximizing arrangement is not simple debt, but rather a contract with mixed debt and equity features. That is, the contract should index the principal obligation to aggregate and/or industry-level economic conditions.We argue that the tax system encourages corporations to absorb more business cycle risk than they would otherwise. It does so in two respects: First, it provides a relative subsidy to debt finance; second, it restricts debt for tax purposes from indexing the principal to common disturbances. At a deeper level, the issue hinges on the institutional aspects of debt renegotiation. If renegotiation were costless, then debt implicitly would have the equity features relevant for responding to business-cycle risk. However, because of the diffuse ownership pattern of much of the newly issued debt and also because of certain legal restrictions, renegotiation is likely to be a costly activity.
Author : Harold Bierman Jr.
Publisher : Springer Science & Business Media
ISBN 13 : 1461510376
Total Pages : 230 pages
Book Rating : 4.4/5 (615 download)
Download or read book The Capital Structure Decision written by Harold Bierman Jr. and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 230 pages. Available in PDF, EPUB and Kindle. Book excerpt: In 1958 an academic paper on corporate finance written by two professors (Merton Miller and Frances Modigliani, who were later awarded the Nobel prize for their research efforts) was published in The American Economic Review. One prime conclusion of their paper was that the exact form of a firm's capital structure did not affect the firm's value. Later papers by the same two authors and by many others modified the assumptions and changed this conclusion. We now think that capital structure decisions do affect a firm's value and corporate managers should understand better the financing alternatives that are available. One of the most important financial decisions is the decision to buy or lease assets. The leasing industry is large and getting larger. Unfortunately, it is very easy for a firm to evaluate incorrectly lease alternatives (see Chapter 12). The capital structure decision is one of the three most important financial decisions that management make (the distribution of earnings and the capital budgeting decisions are the other two contenders). Managers should increase their understanding of capital structure alternatives and remember that choosing the best capital structure is an art and not an exact simple calculation. But applying the art can be improved with understanding.
Download or read book Taxation, Corporate Capital Structure, and Financial Distress written by and published by . This book was released on 1989 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Youngrok Choi
Publisher :
ISBN 13 :
Total Pages : 182 pages
Book Rating : 4.:/5 (318 download)
Download or read book Taxes and Corporate Capital Structure written by Youngrok Choi and published by . This book was released on 2003 with total page 182 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Joseph Kiyoshi Tanimura
Publisher :
ISBN 13 :
Total Pages : 160 pages
Book Rating : 4.:/5 (318 download)
Download or read book Taxes, Financial Distress, and Capital Structure in the United States and Japan written by Joseph Kiyoshi Tanimura and published by . This book was released on 2001 with total page 160 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Francis A. Longstaff
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (119 download)
Download or read book Corporate Taxes and Capital Structure written by Francis A. Longstaff and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the relation between leverage and corporate tax rates using an extensive data set constructed from all corporate income tax returns filed with the IRS from 1926 to 2009. This data set includes financial statement data from millions of private and public corporations of all sizes. We show that corporate leverage has increased significantly over the past century. We find strong evidence that changes in corporate leverage are directly related to changes in corporate tax rates for all but the smallest firms. These results are robust to the inclusion of control variables for the costs of financial distress, corporate liquidity, and capital market and macroeconomic conditions. The adjustment of leverage to changes in corporate tax rates is slower for smaller firms facing financial constraints. We find that the capital structures of the smallest firms are driven much more by external shocks than is the case for larger firms.
Author : Alessandro Gabrielli
Publisher : Springer Nature
ISBN 13 : 3031309804
Total Pages : 103 pages
Book Rating : 4.0/5 (313 download)
Download or read book Tax Avoidance and Capital Structure written by Alessandro Gabrielli and published by Springer Nature. This book was released on 2023-05-23 with total page 103 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides a comprehensive overview of the implications of tax avoidance for a firm’s capital structure, highlighting the key role played by free cash flow and agency conflicts. First, the book provides an outline of the theories and empirical evidence concerning the role of taxes in the Theory of Capital Structure. It reviews the studies investigating the relationship between agency conflicts and capital structure. The book explores the role of free cash flow and agency conflicts in the relationship between tax avoidance and capital structure. In the final section, the results of an empirical investigation conducted on a sample of U.S. public firms are also presented. The empirical research examines whether and how tax avoidance is associated with debt covenant violation across the stages of the corporate life cycle. Specifically, the research uses the concept of the corporate life cycle stage to analyse whether and how the association between tax avoidance and debt covenant violation varies in different agency settings. Consistent with the hypotheses drawn on the Agency Theory, the findings of the empirical research suggest life cycle stages moderate the association between tax avoidance and debt covenant violation. Overall, this book sheds light on the potential implications of tax avoidance activities for a firm’s capital structure. The book will be of interest to both experienced and early-stage scholars interested in the topic. Moreover, the book will also be of interest to policymakers, investors, analysts, lenders, and other market participants.
Author : Evangelos Charalambakis
Publisher :
ISBN 13 :
Total Pages : 23 pages
Book Rating : 4.:/5 (129 download)
Download or read book Leverage Dynamics, the Endogeneity of Corporate Tax Status and Financial Distress Costs, and Capital Structure written by Evangelos Charalambakis and published by . This book was released on 2008 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper empirically examines capital structure decisions in the presence of leverage dynamics and when corporate tax status and financial distress costs are allowed to be endogenous. We deal with the endogeneity of corporate tax by using a before-financing measure of the marginal corporate tax rate as a proxy for the effective corporate tax rate. We find strong evidence of a positive relation between leverage and taxes, irrespective of whether leverage dynamics are allowed for. Using the estimated probability of financial distress as a proxy for financial distress costs, we find that the role of leverage dynamics is crucial to the effect of financial distress on leverage. We find that when leverage dynamics are excluded, the estimated probability of financial distress is positively associated with leverage, that is, an increasing probability of financial distress leads to an increase in leverage. This seems counter-intuitive. When leverage dynamics are included in the model, the probability of financial distress is negatively related to leverage. Our results show that capital structure dynamics are important and that firms trade-off the tax benefit that arises from increasing debt with the increase in possible financial distress that arises from increasing debt.
Author : Peter Brusov
Publisher : Springer
ISBN 13 : 3319147323
Total Pages : 374 pages
Book Rating : 4.3/5 (191 download)
Download or read book Modern Corporate Finance, Investments and Taxation written by Peter Brusov and published by Springer. This book was released on 2015-06-02 with total page 374 pages. Available in PDF, EPUB and Kindle. Book excerpt: This monograph is devoted to the modern theory of capital cost and capital structure and its application to the real economy. In particular, it presents a possible explanation to the causes of global financial crisis. The authors of the book modify the theory of Nobel Prize winners Modigliani and Miller to describe an alternative theory of capital cost and capital structure that can be applied to corporations with arbitrary lifetime and investment projects with arbitrary duration. The authors illustrate their theory with examples from corporate practice and develop investment models that can be applied by companies in their financial operations.
Author : John R. Graham
Publisher : Now Publishers Inc
ISBN 13 : 1933019417
Total Pages : 136 pages
Book Rating : 4.9/5 (33 download)
Download or read book A Review of Taxes and Corporate Finance written by John R. Graham and published by Now Publishers Inc. This book was released on 2006 with total page 136 pages. Available in PDF, EPUB and Kindle. Book excerpt: A Review of Taxes and Corporate Finance investigates the consequences of taxation on corporate finance focusing on how taxes affect corporate policies and firm value. A common theme is that tax rules affect corporate incentives and decisions. A second emphasis is on research that describes how taxes affect costs and benefits. A Review of Taxes and Corporate Finance explores the multiple avenues for taxes to affect corporate decisions including capital structure decisions, organizational form and restructurings, payout policy, compensation policy, risk management, and the use of tax shelters. The author provides a theoretical framework, empirical predictions, and empirical evidence for each of these areas. Each section concludes with a discussion of unanswered questions and possible avenues for future research. A Review of Taxes and Corporate Finance is valuable reading for researchers and professionals in corporate finance, corporate governance, public finance and tax policy.
Author : Diana Nyachieo
Publisher : LAP Lambert Academic Publishing
ISBN 13 : 9783659394959
Total Pages : 56 pages
Book Rating : 4.3/5 (949 download)
Download or read book Corporate Taxation and Capital Structure written by Diana Nyachieo and published by LAP Lambert Academic Publishing. This book was released on 2013 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: Proper balance of debt and equity securities in a firm's capital structure is a vital decision of any firm's management. Over reliance of either source of finance negatively affects value of the firm. Listed Firms in Kenya show preference for debt to equity securities when raising external finance. Consequently on average listed firms in Kenya are highly geared as shown by the average leverage ratio of 1.288409. Over-reliance of debt securities may expose firms to the risk of financial distress whose materialization results to insolvency. Taxes both direct and implicit are known to affect the leverage decisions of firms. This book sheds light on the effect of corporate taxation on the capital structure of firms. Moreover, the speed of adjustment of listed firms towards a target leverage ratio is ascertained. Analysis in this book is critical to domestic and foreign investors, The Capital Market Authority (CMA) of Kenya, The Government of Kenya and other such stakeholders such as investment analysts
Author : Ruud A. de Mooij
Publisher : International Monetary Fund
ISBN 13 : 1475578296
Total Pages : 20 pages
Book Rating : 4.4/5 (755 download)
Download or read book Curbing Corporate Debt Bias written by Ruud A. de Mooij and published by International Monetary Fund. This book was released on 2017-02-10 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: Tax provisions favoring corporate debt over equity finance (“debt bias”) are widely recognized as a risk to financial stability. This paper explores whether and how thin-capitalization rules, which restrict interest deductibility beyond a certain amount, affect corporate debt ratios and mitigate financial stability risk. We find that rules targeted at related party borrowing (the majority of today’s rules) have no significant impact on debt bias—which relates to third-party borrowing. Also, these rules have no effect on broader indicators of firm financial distress. Rules applying to all debt, in contrast, turn out to be effective: the presence of such a rule reduces the debt-asset ratio in an average company by 5 percentage points; and they reduce the probability for a firm to be in financial distress by 5 percent. Debt ratios are found to be more responsive to thin capitalization rules in industries characterized by a high share of tangible assets.
Author : K.H. Erickson
Publisher : K.H. Erickson
ISBN 13 :
Total Pages : 100 pages
Book Rating : 4./5 ( download)
Download or read book Corporate Finance: A Simple Introduction written by K.H. Erickson and published by K.H. Erickson. This book was released on 2018-10-03 with total page 100 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate Finance: A Simple Introduction provides an accessible guide to the principles and methods of corporate finance, with equations and examples, empirical evidence, and diagrams to illustrate the analysis. Examine the traditional theory of optimal debt and equity financing, how Modigliani and Miller’s theory on capital structure differs, and the impact corporate and personal taxes or market imperfections may have on the optimal capital structure. Understand dividend irrelevance theory, the factors driving the dividend decision, and why companies may prefer share repurchases to paying dividends. Explore option theory with long and short calls and puts explained, and the Black-Scholes option pricing model and the factors affecting it detailed. See the variety of ways traders may use options, as speculators make profits betting on price movements, hedgers eliminate risk, and arbitrageurs may make risk-free profits exploiting undervalued options. Look at why companies seek mergers & acquisitions, the merger process they undertake, how a firm can improve its chances of making an acquisition, and some takeover defences for resistant firms. Empirical evidence on merger performance is presented, and alternative explanations examined.
Author : John B. Shoven
Publisher : Brookings Institution Press
ISBN 13 : 9780815714262
Total Pages : 228 pages
Book Rating : 4.7/5 (142 download)
Download or read book Debt, Taxes and Corporate Restructuring written by John B. Shoven and published by Brookings Institution Press. This book was released on 2012-01-01 with total page 228 pages. Available in PDF, EPUB and Kindle. Book excerpt: The boom in corporate restructuring, accompanied by large increases in debt finance, was one of the most important developments in the U.S. economy in the 1980s. Financial and tax specialists analyze how the U.S. tax system-especially in its bias toward debt financing-has affected corporate financial decisions and influenced the recent wave of corporate restructuring. The authors evaluate the hypothesis that the rise in the cost of capital during the 1980s helped stimulate the surge in corporate takeovers. They analyze the effect that changes in tax laws and in the volume of government debt have had on corporate financial decisions. The authors examine how recent financial innovations have blurred the distinction between debt and equity finance.
Author : Peter Brusov
Publisher : Springer
ISBN 13 : 331999686X
Total Pages : 571 pages
Book Rating : 4.3/5 (199 download)
Download or read book Modern Corporate Finance, Investments, Taxation and Ratings written by Peter Brusov and published by Springer. This book was released on 2018-11-11 with total page 571 pages. Available in PDF, EPUB and Kindle. Book excerpt: This monograph is devoted to a modern theory of capital cost and capital structure created by this book’s authors, called the Brusov–Filatova–Orekhova (BFO) theory, and its application to the real economy. BFO theory promises to replace the traditional theory of capital cost and capital structure by Nobel laureates Modigliani and Miller. This new theory in particular, presents a possible explanation to the causes of the recent global financial crisis. The authors of the book describe the general theory of capital cost and capital structure that can be applied to corporations of arbitrary age (or with arbitrary lifetime) and investment projects with arbitrary duration. The authors illustrate their theory with examples from corporate practice and develop investment models that can be applied by companies in their financial operations. This updated second edition includes new chapters devoted to the application of the BFO theory in ratings, banking and other areas. The authors also provide a new approach to rating methodology highlighting the need for including financial flow discounting, the incorporation of rating parameters (in particular, financial ratios) into the modern theory of capital structure - BFO theory. This book aims to change our understanding of corporate finance, investments, taxation and rating procedures. The authors emphasize that the most used principles of financial management should be changed in accordance to BFO theory.
Author :
Publisher : Bookboon
ISBN 13 : 8776815692
Total Pages : 61 pages
Book Rating : 4.7/5 (768 download)
Download or read book Corporate Finance: Part II written by and published by Bookboon. This book was released on with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt:
