Wealth Maximization and the Cost of Capital / Alan J. Auerbach.

Format:

Book

Author/Creator:

Auerbach, Alan J.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w0254.

NBER working paper series no. w0254

Language:

English

Subjects (All):

Capital gains tax.

Taxation.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1980.

Cambridge, Massachusetts : National Bureau of Economic Research, 1980.

Summary:

In this paper we explore the issue of wealth maximization and the implied behavior of the firm, paying particular attention to the results discussed above and how they are affected by the existence of capital income taxes. Our results indicate that a tax structure similar to that in existence in the United States influences the cost of capital in a very different way than has been assumed previously and that the relative advantages of debt over equity as a method of finance, and capital gains over dividends as a vehicle for personal realization of corporate profits, may have been greatly overstated. These findings may help to explain certain aspects of corporate financial behavior that have seemed puzzling.

Notes:

Print version record

April 1980.