%D 2015
%L eprints2735
%X 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.
%A Giovanna Nicodano
%A Luca Regis
%K JEL Classification Codes: G32, H25, H32, L22 - Keywords: Ownership structure, Capital structure, Dividend taxes, Thin Capitalization, Groups, Securitization, Private equity.
%N 7
%T Ownership, Taxes and Default
%I IMT Institute for Advanced Studies Lucca