EconPapers    
Economics at your fingertips  
 

Taxes and capital structure: Understanding firms’ savings

Roc Armenter and Viktoria Hnatkovska ()

Journal of Monetary Economics, 2017, vol. 87, issue C, 13-33

Abstract: The U.S. non-financial corporate sector became a net lender to the rest of the economy in the early 2000s, with close to half of all publicly-traded firms holding financial assets in excess of their debt liabilities. We develop a simple dynamic model of debt and equity financing where firms strive to accumulate financial assets even though debt is fiscally advantageous relative to equity. Moreover, firms find it optimal to fund additional financial asset holdings through equity revenues. The calibrated model matches well the distribution of public firms’ balance sheets during the 2000s and correctly predicts which firms are net savers.

Keywords: Corporate savings; Debt; Equity; Dividend taxation, (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393217300259
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:87:y:2017:i:c:p:13-33

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-04-18
Handle: RePEc:eee:moneco:v:87:y:2017:i:c:p:13-33