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Taxes, Regulations And The Corporate Debt Market

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  • Orhan Erem Atesagaoglu

Abstract

Outstanding credit market debt in the U.S. corporate sector increased dramatically over the second half of the 20th century. During this period, tax rates on dividend distributions and corporate income decreased. This article argues that the observed decline in dividend and corporate income tax rates generated an improvement in the collateral value of corporate assets and led to an increase in U.S. corporate debt. To analyze this conjecture, we build a general equilibrium model with enforcement constraints that induce endogenous limits on debt financing. We find that the model can account for the time‐series features of U.S. corporate debt data.

Suggested Citation

  • Orhan Erem Atesagaoglu, 2012. "Taxes, Regulations And The Corporate Debt Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(3), pages 979-1004, August.
    • Handle: RePEc:wly:iecrev:v:53:y:2012:i:3:p:979-1004
    DOI: 10.1111/j.1468-2354.2012.00708.x
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    References listed on IDEAS

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    1. Alexis Anagnostopoulos & Orhan Erem Atesagaoglu & Eva Cárceles‐Poveda, 2022. "Financing corporate tax cuts with shareholder taxes," Quantitative Economics, Econometric Society, vol. 13(1), pages 315-354, January.
    2. Erosa, Andrés & González, Beatriz, 2019. "Taxation and the life cycle of firms," Journal of Monetary Economics, Elsevier, vol. 105(C), pages 114-130.
    3. Ghilardi, Matteo F. & Zilberman, Roy, 2024. "Dividend Taxation and Financial Business Cycles," Economics Letters, Elsevier, vol. 238(C).
    4. Kempkes, Gerhard & Stähler, Nikolai, 2021. "Re-allocating taxing rights and minimum tax rates in international profit taxation," Discussion Papers 03/2021, Deutsche Bundesbank.
    5. Alexis Anagnostopoulos & Orhan Erem Atesagaoglu & Eva Carceles-Poveda, 2014. "On the Double Taxation of Corporate Profits," Department of Economics Working Papers 14-03, Stony Brook University, Department of Economics.
    6. Winter, Christoph & Kraus, Beatrice, 2016. "Do Tax Changes Affect Credit Markets and Financial Frictions? Evidence from Credit Spreads," VfS Annual Conference 2016 (Augsburg): Demographic Change 145636, Verein für Socialpolitik / German Economic Association.

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