Collateral, Taxes, and Leverage

• Autores: Shaojin Li, Toni M. Whited, Yufeng Wu
• Localización: Review of Financial Studies, ISSN-e 1465-7368, Vol. 29, Nº. 6, 2016, págs. 1453-1500
• Idioma: inglés
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• Dialnet Métricas: 1 Cita
• Resumen

  • We quantify the importance of collateral versus taxes for firms' capital structures. We estimate a dynamic model in which a taxable firm seeks financing for investment, and a dynamic contracting environment motivates endogenous collateral constraints. Optimal leverage stays a safe distance from the constraint, balancing the tax benefit of debt with the cost of lost financial flexibility. We estimate this flexibility cost to be 7.2% of firm assets, a percentage that is comparable to the tax benefit. Models with different tax rates fit the data equally well, and leverage responds to the tax rate only when taxes are low.