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Taxation and Corporate Financial Policy

J. Gregory Ballentine and Charles E. McLure, Jr.
Authors registered in the RePEc Author Service: Charles E. Mclure, Jr. ()

No 243, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A model of corporate financial policy (debt-equity ratios and dividend payout rates) is included in the Harberger general equilibrium model of incidence of the corporate income tax. Illustrative calculations of the distortions of financial policy and increases in risk premiums induced by the corporate tax are provided. Because risk premiums on corporate securities would be reduced, eliminating the corporate tax or integrating it into the personal tax would increase the income of non-corporate investors relatively more than that of investors in corporate securities, and is therefore less regressive than is commonly thought.

Date: 1980-05
Note: PE
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Published as Ballentine, J. Gregory and McLure, Jr., Charles E. "Taxation and Corporate Financial Policy." The Quarterly Journal of Economics, Vol. XCIV, No. 2, (March 1980), pp. 351-372.

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