This paper determines the optimal ownership share held by a unit into a second unit when both face a tax-bankruptcy trade-off. Full ownership is optimal when the first unit has positive debt, because dividends help avoid its default. Positive debt is, in turn, optimal when its corporate tax rate exceeds a threshold, and/or thin capitalization rules place an upper limit on the debt level in the second unit, and/or the Volcker Rule bans bailout transfers to the second unit. Full ownership is no longer optimal only if there is a tax on intercorporate dividend. This theory rationalizes observations on multinationals, financial conglomerates, and family groups.
Nicodano, G., & Regis, L. (2019). A trade-off theory of ownership and capital structure. JOURNAL OF FINANCIAL ECONOMICS, 131(3), 715-735 [10.1016/j.jfineco.2018.09.001].
|Titolo:||A trade-off theory of ownership and capital structure|
|Citazione:||Nicodano, G., & Regis, L. (2019). A trade-off theory of ownership and capital structure. JOURNAL OF FINANCIAL ECONOMICS, 131(3), 715-735 [10.1016/j.jfineco.2018.09.001].|
|Appare nelle tipologie:||1.1 Articolo in rivista|