Modigliani and Miller showed that the market value of the company is independent of its capital structure, and suggested that dividend policy makes no difference to this law of one price. We experimentally test the MM theorem in a complete market with two simultaneously traded assets, employing...

This paper is the first attempt to reconcile the prospect theory and the contract theory in explaining the observed financing decisions. In a world of ambitious and aggressive economic agents, even the original equilibria under the presence of asymmetric information break down. When the...

This paper analyzes tax competition when welfare maximizing jurisdictions levy source-based corporate taxes and multinational enterprises choose tax-efficient capital-to-debt ratios. Under separate accounting, multinationals shift debt from low-tax to high-tax countries. The Nash equilibrium of...

This paper analyzes tax competition when welfare maximizing jurisdictions levy source-based corporate taxes and multinational enterprises choose tax-efficient capital-to-debt ratios. Under separate accounting, multinationals shift debt from low-tax to high-tax countries. The Nash equilibrium of...

Over the past thirty years, a number of social entrepreneurs have managed to create fairly large social enterprises. Properly run and scaled, they can generate sufficient cash flow to support debt financing at manageable levels of risk and, depending on their business model and legal form, also...

Municipalities provide infrastructure and essential services financed by taxes and debt. We develop a model of municipal capital structure, defined as the debt-to-investment ratio, that rests on two primary economic forces: the elasticity of the tax base with respect to taxes and services, and...