Tax Reform and Corporate Capital Structure

Mark J Warshawsky

Public Finance = Finances publiques, 1989, vol. 44, issue 2, 295-307

Abstract: This paper examines the likely net effect of the U.S. Tax Reform Act of 1986 on corporate capital structure, taking into account changes affecting investor demand for corporate liabilities and the optimal leveraging decisions of firms. The analytical framework is the DeAngelo-Masulis model (1980). The conclusion drawn is that tax reform causes an increase in the supply of, and the demand for, corporate debt so that the debt-to-equity ratio in the corporate sector raises as a result. Peacock-Shaw Approach

Date: 1989
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Persistent link: https://EconPapers.repec.org/RePEc:pfi:pubfin:v:44:y:1989:i:2:p:295-307

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