Miller's Equilibrium and Uncertainty

C. Jones

ANUCBE School of Economics Working Papers from Australian National University, College of Business and Economics, School of Economics

Abstract: This paper highlights the arbitrage by firms in Miller's (1977) equilibrium when consumers face (short) selling constraints to restrict tax arbitrage. In this competitive equilibrium firms create risky tax-preferred securities that divide investors into strict tax clienteles; any changes in debt-equity ratios by individual firms have no real effects on consumers because other firms undo them.

Keywords: CAPITAL; BUSINESS FINANCING; ARBITRAGE (search for similar items in EconPapers)
JEL-codes: G32 G38 (search for similar items in EconPapers)
Date: 1999
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