IDEAS home Printed from https://ideas.repec.org/p/fth/nystfi/98-055.html
   My bibliography  Save this paper

Leverage Changes and Product Pricing Incentives -- A Tax Induced Analysis

Author

Listed:
  • S. Abraham Ravid

Abstract

This paper provides a tax induced framework which can explain the linkage between pricing policies and capital structure choice documented in recent studies by Chevalier (1995a), (1995b) and Phillips (1995). The model proves that firms will optimally change their pricing decisions after taking on additional debt. The reason is that the value of debt related tax shelters and the probability of their use is dependent on revenues realized in the product market. The direction of change is shown to depend on several variables, importantly the elasticity of demand for the firm's product. In an ensuing section, the paper extends the analysis to provide some insights into the impact of pricing choices on the promised yield of debt.

Suggested Citation

  • S. Abraham Ravid, 1997. "Leverage Changes and Product Pricing Incentives -- A Tax Induced Analysis," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-055, New York University, Leonard N. Stern School of Business-.
  • Handle: RePEc:fth:nystfi:98-055
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

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


    Cited by:

    1. Matthew J. Clayton & S. Abraham Ravid, 1999. "The Effect of Leverage on Bidding Behavior: Theory and Evidence from the FCC Auctions," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-055, New York University, Leonard N. Stern School of Business-.

    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:fth:nystfi:98-055. 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: (Thomas Krichel). General contact details of provider: http://edirc.repec.org/data/fdnyuus.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.