The personal-tax advantages of equity

• 成果类型: Article
• 署名作者: Green, RC; Hollifield, B
• 署名单位: Carnegie Mellon University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(02)00246-5
• 发表日期: 2003
• 页码: 175-216
• 关键词: capital gains taxes; capital structure; STOCK REPURCHASES; valuation

摘要

We value a firm that pays its cash flows to equity through share repurchases in a dynamic environment where personal taxes are paid on capital gains upon realization. The cost of capital is reduced by approximately 0.8% through the use of repurchases relative to dividends. We use the empirical distribution of pre-tax free cash flows in Fama and French (1999) to evaluate the tradeoffs between the costs of financial distress, the personal-tax advantages of equity, and the corporate-tax advantage to debt. The optimal capital structure is interior with a 3% bankruptcy cost. (C) 2002 Elsevier Science B.V. All rights reserved.