TY - JOUR
T1 - Government debt and private leverage. An extension of the Miller theorem
AU - McDonald, Robert L.
N1 - Funding Information:
*I would like to thank Lawrence Summers for extremely helpful discussions. I am also grateful for comments from an anonymous referee, and from Fischer Black, Stanley Fischer, Alex Kane, Alan Marcus and participants in the B.U. finance seminar. Some of the results in this paper were obtained independently in Taggart (1982). This is based on a chapter in my M.I.T. Ph.D. dissertation. Research support from the National Science Foundation and the Federal Reserve Bank of Boston is gratefully acknowledged.
PY - 1983/12
Y1 - 1983/12
N2 - This paper shows how government financing decisions can influence the corporate decision to use debt or equity finance. In particular, it is shown that an increase in the stock of taxable government debt reduces the equilibrium quantity of corporate debt, and that an increase in the stock of tax-free government debt reduces the equilibrium quantity of corporate equity. The effects of inflation rate and tax rate changes are also considered.
AB - This paper shows how government financing decisions can influence the corporate decision to use debt or equity finance. In particular, it is shown that an increase in the stock of taxable government debt reduces the equilibrium quantity of corporate debt, and that an increase in the stock of tax-free government debt reduces the equilibrium quantity of corporate equity. The effects of inflation rate and tax rate changes are also considered.
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U2 - 10.1016/0047-2727(83)90038-5
DO - 10.1016/0047-2727(83)90038-5
M3 - Article
AN - SCOPUS:0039708963
SN - 0047-2727
VL - 22
SP - 303
EP - 325
JO - Journal of Public Economics
JF - Journal of Public Economics
IS - 3
ER -