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Ownership, Taxes and Default

Nicodano, Giovanna and Regis, Luca Ownership, Taxes and Default. EIC working paper series #7/2015 IMT Institute for Advanced Studies Lucca ISSN 2279-6894. (Submitted)

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This paper determines ownership and leverage of two units facing a tax- bankruptcy trade-o�. Connected units have higher leverage and lower tax burden, because of internal support through both bailouts and corporate dividends. Owner- ship adjusts to additional tax provisions. A hierarchical group with a wholly-owned subsidiary results from Thin Capitalization rules. The presence of corporate divi- dend taxes generates horizontal groups, or a Special Purpose Vehicle, or a private equity fund. Combinations of tax provisions contain tax savings, debt and default in connected units. No bailout provisions, such as the Volcker rule, succeed in reducing leverage and default.

Item Type: Working Paper (EIC working paper series)
Uncontrolled Keywords: JEL Classification Codes: G32, H25, H32, L22 - Keywords: Ownership structure, Capital structure, Dividend taxes, Thin Capitalization, Groups, Securitization, Private equity.
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Research Area: Economics and Institutional Change
Depositing User: Caterina Tangheroni
Date Deposited: 30 Jul 2015 15:03
Last Modified: 31 Jul 2015 10:30
URI: http://eprints.imtlucca.it/id/eprint/2735

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