Taxation and the Firm's Leverage Decision: A Survey of Theoretical Issues

Jan Bartholdy, Gordon Fisher and Jack Mintz

Working Paper from Economics Department, Queen's University

Abstract: This survey outlines various models used to analyze the impact of taxation on the firm's leverage decision. The models incorporate: i) differential taxation of household from a progressive tax system; ii) loss offsetting under the corporate tax; iii) managerial incentive to avoid moral hazard; iv) bankruptcy; and v) asymmetric information between inside and outside investors. The theory is applied to the Canadian tax system.

Pages: 71 pages
Date: 1986
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:674

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