IDEAS home Printed from https://ideas.repec.org/a/oup/rfinst/v27y2014i9p2736-2772..html

Guarantees, Leverage, and Taxes

Author

Listed:
  • Elisa Luciano
  • Giovanna Nicodano

Abstract

This paper considers the optimal joint decision on firm organization and capital structure under a tax-bankruptcy trade-off, stressing the role of guarantees against default. Conditional guarantees, which are embedded in parent-subsidiary structures, increase joint value and joint debt relative to unguaranteed stand-alone firms. Such guarantees, that are unilateral rather than mutual for moderate default costs, may dominate the unconditional mutual guarantees built in mergers. We study the optimal characteristics of both guarantors and beneficiaries, as well as their impact on the self-enforcement potential of conditional guarantees.

Suggested Citation

  • Elisa Luciano & Giovanna Nicodano, 2014. "Guarantees, Leverage, and Taxes," The Review of Financial Studies, Society for Financial Studies, vol. 27(9), pages 2736-2772.
    • Handle: RePEc:oup:rfinst:v:27:y:2014:i:9:p:2736-2772.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/rfs/hhu010
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:27:y:2014:i:9:p:2736-2772.. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/sfsssea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.