We study several important tax-related issues related to the measurement and use of corporate marginal tax rates. First, we develop an AR(1) method to simulate corporate marginal income tax rates and demonstrate that the AR(1) model improves upon the extant random walk and bin approaches. The new AR(1) approach captures firm-specific features, including mean-reversion in taxable income. Second,...

The negative effects of a high level of government debt are now generally acknowledged. The extensive borrowing of past years has enlarged the share of interest payments in government spending, thus restricting the scope for future fiscal policy action. There is very little prospect of being able to initiate economic recovery by way of expansive fiscal policy. High deficits and rising debt rati...

a r t i c l e i n f o This paper analyses the impact of financial sector policy changes on the dynamics of public debt. Using a panel of 89 countries from 1973 to 2005, we find that, overall, while the implementation of financial liberalisation policies significantly raises the public debt growth rate, the adoption of financial re-regulation measures does not reduce it in a significant manner. ...

The Anatomy of Fluctuations in Book/Market Ratios We analyze trading activity accompanying equities' year-to-year switches from " growth " (low book-to-market ratios) to " value " (high book-to-market ratios), and vice versa. We find that a large book/market ratio increase, i.e., a shift from growth to value, is accompanied by a strongly negative small-trade order imbalance. Large-trade imbalan...

Abstract This study attempts to predict high growth firm (HGF) status with financial ratios. Measures related the firm’s effectiveness in using assets generate profits, EBITDA margin, debt ratio, equity-to-debt ratio and return on are associated HGF status. While ratios improve prediction, prediction remains modest (AUC = 0.627). suggests it is difficult assume a very good forecast from only ra...

This paper investigates the impact of asset liquidity on the valuation of corporate securities and the firm’s financing decisions. I show that asset liquidity increases debt capacity only when bond covenants restrict the disposition of assets. By contrast, I demonstrate that, with unsecured debt, greater liquidity increases credit spreads on corporate debt and reduces optimal leverage. The mode...

This paper tests for changes in firms' production and pricing decisions in four industries in which firms have sharply increased their financial leverage. The analysis of product price and quantity data show that industry product market decisions are associated with capital structure. In three industries, output is negatively associated with the average industry debt ratio. In the one industry ...

This case study of fiscal sustainability in Turkey after the crisis in 2001 reviews and extends quantitative approaches to fiscal sustainability analysis and brings them together in a user-friendly tool applicable in a data-sparse environment. It combines a dynamic simulations approach with a steady-state consistency approach. It also incorporates user-defined stress tests and stochastic simula...

This paper develops a framework for analyzing the impact of macroeconomic conditions on credit risk and dynamic capital structure choice. We begin by observing that when cash flows depend on current economic conditions, there will be a benefit for firms to adapt their default and financing policies to the position of the economy in the business cycle phase. We then demonstrate that this simple ...