Value of tax benefits of a dynamic debt policy with regime switching

Michael Dothan and Wei Wu

Applied Economics Letters, 2017, vol. 24, issue 12, 888-892

Abstract: The article presents a method for valuation of stochastic future income with three barriers: a default barrier, a pre-default barrier and a refinancing barrier. Between the pre-default and default barriers, there is an ongoing cost of financial distress. In this framework, we derive state-dependent present value factors that can be applied to problems of valuation of firms, optimal financial structure and mitigation of agency conflicts between managers and investors. We illustrate our method with an analysis of the value of tax benefits of a dynamic debt policy.

Date: 2017
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/13504851.2016.1240327 (text/html)
Access to full text is restricted to subscribers.

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:taf:apeclt:v:24:y:2017:i:12:p:888-892

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/13504851.2016.1240327

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().