In 2011, the publicly held debt-to-GDP ratio in the United States reached 68% and is expected to continue rising. Many proposals to curb the government de…cit and the resulting debt are being discussed. In this paper, we use the standard neoclassical growth model to examine the future path of output, budget de…cits, and debt in the U.S. economy under di¤erent tax policies. While this framework ...

The present study aimed at investigating the effect of debt and free cash flows on tax avoidance by emphasizing the role of institutional ownership in companies listed on the Tehran Stock Exchange. The statistical population of the study includes all companies listed on the Tehran Stock Exchange from 2013 to 2019. The statistical data for testing hypotheses based on the databases of Tehran Stoc...

The existing theoretical literature provides little justi…cation for a corporate debt subsidy. We illustrate the welfare bene…t of this subsidy and study how the social costs and bene…ts change with the duration of industry distress. In our model, two …rms engage in socially wasteful competition for survival in a declining industry. Firms di¤er on two dimensions: exogenous productivity and endo...

Empirical analyses of labor tax and public debt processes provide prima facie evidence for imperfect government insurance. This paper considers a model in which the government’s inability to commit to future policies or to report truthfully its spending needs renders government debt markets endogenously incomplete. A method for solving for optimal fiscal policy under these constraints is develo...

This paper investigates the responsiveness of household portfolios to tax incentives by exploiting a substantial tax reform that altered after-tax returns and cost of debt for a large number of households. An extraordinary panel data set that covers two years before and after the reform is used for the analysis. Our empirical findings suggest that households reshuffle their balance sheets in th...

This paper evaluates a comprehensive list of metrics proposed for detecting earnings management in a setting where managers manipulate earnings to round up reported EPS. I find that deferred tax expense is able to detect earnings management in the rounding-up setting while discretionary accruals models are not. Further analysis provides evidence that firms manipulate bad debt expense for the pu...

This paper constructs a dynamic model of government borrowing and default. The government faces a fiscal constraint in that it cannot raise tax rates. By defaulting on the debt, the government can increase domestic consumption. Two types of default arise in this environment: fiscal defaults and aggregate defaults. Fiscal defaults occur because the government cannot service the debt due to its i...

I study the effects of corporate income taxes on a firm’s cost of equity capital. I show theoretically that taxes increase the riskiness of a firm’s after-tax cash flows. The effect arises from the asymmetric treatment of gains and losses in the tax code and applies to both levered and unlevered firms. The main prediction of the model is that firms with lower tax shields have higher expected st...