Taxes and Corporate Capital Structure in an Incomplete Market

Taggart, Robert

doi:10.3386/w0594

Cited by 9 publications

(13 citation statements)

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“…Thus, Auerbach and King's (1981) spanning condition does not hold. Markets are incomplete in the sense of Taggart (1980 We will introduce uncertainty by using the model of intertemporal consumption and portfolio allocation introduced by Merton (1971). This has the dual advantages of allowing investors to have arbitrary utility functions, and yet resulting in a mean-variance model of asset pricing.…”

Section: Equilibrium With Uncertaintymentioning

confidence: 99%

Government Debt and Private Leverage: An Extension of the Miller Theorem

McDonald

1982

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This paper shows how government financing decisions can influence the corporate decision to use debt or equity finance. In particular, it is shown that an increase in the stock of taxable government debt reduces the equilibrium quantity of corporate debt, and that an increase in the stock of tax-free government debt reduces the equilibrium quantity of corporate equity. The effects of inflation rate and tax rate changes are also considered.

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Section: Equilibrium With Uncertaintymentioning

confidence: 99%