Optimal capital structure and credit policy with bank-tax-guarantee

Biao Chen, Jinglu Jiang and Nanhui Zhu

Finance Research Letters, 2023, vol. 58, issue PA

Abstract: We study the optimal capital structure, credit policy and investment strategy of a small- and micro-sized enterprise that funds the expansion investment by bank-tax-guarantee, an innovative financing pattern that utilizes the superimposed effects of bank tax cooperation and bank guarantee cooperation. We show that investment is accelerated by stricter tax supervision, and is first delayed and then accelerated as the degree of tax payment increases. The optimal leverage ratio decreases with the cost of tax evasion and the degree of tax payment. The loose credit policy reduces corporate debt scale, guarantee cost and optimal leverage ratio.

Keywords: Capital structure; Credit policy; Bank-tax-guarantee (search for similar items in EconPapers)
JEL-codes: G13 G31 G32 H81 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323006797

DOI: 10.1016/j.frl.2023.104307

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