Wealth Maximization and the Cost of Capital
AbstractIn this paper we explore the issue of wealth maximization and the implied behavior of the firm, paying particular attention to the results discussed above and how they are affected by the existence of capital income taxes. Our results indicate that a tax structure similar to that in existence in the United States influences the cost of capital in a very different way than has been assumed previously and that the relative advantages of debt over equity as a method of finance, and capital gains over dividends as a vehicle for personal realization of corporate profits, may have been greatly overstated. These findings may help to explain certain aspects of corporate financial behavior that have seemed puzzling.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0254.
Date of creation: Apr 1980
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stiglitz, Joseph E., 1973. "Taxation, corporate financial policy, and the cost of capital," Journal of Public Economics, Elsevier, vol. 2(1), pages 1-34, February.
- Stapleton, R C, 1972. "Taxes, the Cost of Capital and the Theory of Investment," Economic Journal, Royal Economic Society, vol. 82(328), pages 1273-92, December.
- Bradford, David F., 1981.
"The incidence and allocation effects of a tax on corporate distributions,"
Journal of Public Economics,
Elsevier, vol. 15(1), pages 1-22, February.
- David F. Bradford, 1979. "The Incidence and Allocation Effects of a Tax on Corporate Distributions," NBER Working Papers 0349, National Bureau of Economic Research, Inc.
- Feldstein, Martin & Sheshinski, Eytan & Green, Jerry, 1979.
"Corporate Financial Policy and Taxation in a Growing Economy,"
3203643, Harvard University Department of Economics.
- Feldstein, Martin S & Green, Jerry & Sheshinski, Eytan, 1979. "Corporate Financial Policy and Taxation in a Growing Economy," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 411-32, August.
- King, Mervyn A, 1974. "Taxation and the Cost of Capital," Review of Economic Studies, Wiley Blackwell, vol. 41(1), pages 21-35, January.
- Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
- Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
- Alan J. Auerbach, 1980.
"Share Valuation and Corporate Equity Policy,"
NBER Working Papers
0255, National Bureau of Economic Research, Inc.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.