Capital Structure, Investment, and Fire Sales

• 成果类型: Article
• 署名作者: Gale, Douglas; Gottardi, Piero
• 署名单位: New York University; Imperial College London; European University Institute; Universita Ca Foscari Venezia
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhv016
• 发表日期: 2015
• 页码: 2502
• 关键词: TAX ARBITRAGE; equilibrium; externalities; bankruptcy; debt; finance

摘要

We study a dynamic general equilibrium model in which firms choose their investment level and capital structure, trading off the tax advantages of debt against the risk of costly default. Bankruptcy costs are endogenous, as bankrupt firms are forced to liquidate their assets, resulting in a fire sale if the market is illiquid. When the corporate income tax rate is positive, firms have a unique optimal capital structure. In equilibrium, firms default with positive probability and their assets are liquidated at fire-sale prices. The equilibrium features underinvestment and is constrained inefficient. In particular there is too little debt and default.