Advanced Search
MyIDEAS: Login

Corporate Supply of Index Bonds

Contents:

Author Info

  • Stanley Fischer
Registered author(s):

    Abstract

    This paper develops a simple theory of the supply of index bonds by a firm, and uses that model to examine in some detail possible reasons for the non-existence of privately issued index bonds in the United States. The major elements of the theory involve the trade-off between the tax advantages of using debt finance and the increasing risk of bankruptcy debt finance involves. The theory is first used to examine the supply of nominal bonds -- it is thus a theory of the debt-equity ratio. Then the firm's optimal supply of index bonds is examined, and the values of the firm using the alternative debt instruments is compared. In general, there is no reason to think that nominal bonds dominate index bonds -- i.e. the theory cannot explain why firms have not issued index bonds. The paper then turns to a number of other reasons that have been advanced for the non-issue of indexed bonds in the United States, such as the tax treatment of such instruments and the argument that their issue would saddle the firm with open-ended obligations.

    Download Info

    If 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.
    File URL: http://www.nber.org/papers/w0331.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0331.

    as in new window
    Length:
    Date of creation: Mar 1979
    Date of revision:
    Publication status: published as Fischer, Stanley. "On the Nonexistence of Privately Issued Index Bonds inthe U.S. Capital Market." Inflation, Debt, and Indexation, edited by Rudiger Dornbusch and Mario Henrique Simonsen. Cambridge: M.I.T. Press, (1983),pp. 223-246.
    Handle: RePEc:nbr:nberwo:0331

    Note: PE
    Contact details of provider:
    Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Email:
    Web page: http://www.nber.org
    More information through EDIRC

    Related research

    Keywords:

    References

    References listed on IDEAS
    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.:
    as in new window
    1. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    2. Fama, Eugene F, 1975. "Short-Term Interest Rates as Predictors of Inflation," American Economic Review, American Economic Association, vol. 65(3), pages 269-82, June.
    3. Kraus, Alan & Litzenberger, Robert H, 1973. "A State-Preference Model of Optimal Financial Leverage," Journal of Finance, American Finance Association, vol. 28(4), pages 911-22, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. James E. Pesando, 1981. "Employee Valuation of Pension Claims and the Impact of Indexing Initiatives," NBER Working Papers 0767, National Bureau of Economic Research, Inc.
    2. Patric H. Hendershott & Kevin E. Villani, 1981. "Housing Finance in the United States in the Year 2001," NBER Working Papers 0739, National Bureau of Economic Research, Inc.
    3. Zvi Bodie, 1980. "Purchasing-Power Annuities: Financial Innovation for Stable Real Retirement Income in an Inflationary Environment," NBER Working Papers 0442, National Bureau of Economic Research, Inc.
    4. Eva Marikova Leeds, 1991. "The Market for Indexed Financial Instruments," Eastern Economic Journal, Eastern Economic Association, vol. 17(3), pages 291-296, Jul-Sep.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:0331. See general 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 you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.