A simple counterexample shows that the formula developed by Miles and Ezzell (1980) can be used to create an arbitrage opportunity. The only consequence to be drawn is that their WACC formula cannot be applied under the circumstances assumed by Miles and Ezzel. We show how the WACC theory has to...

We estimate the impact of effective profit taxation on the financial leverage ofcorporations on the basis of a pseudo-panel constructed from corporate tax return micro data for theperiod 1998-2001, a period which saw the introduction of a major corporate tax reform in Germany.The financial...

From a tax planner’s point of view, it is often attractive to choose debt over equity finan-cing. As this has led to an increase of debt financing of corporations, many countries haveintroduced thin capitalization rules to secure their tax revenues. We analyze the influenceof section 8a of the...

This paper analyzes how agency problems in nancial contracting determine risk-taking andinvestment. In perfect capital markets a risk-neutral rm would invest until the expectedmarginal return equals the interest rate. However, as rms with little net-worth face agencycost in nancial contracting...

We present a multi-period mean-variance optimization program which allows for a joint optimization of the balance and off-balance sheet. Our first finding is the proof of a conjecture of Li and Ng (cf. [LN00]), Leippold, Trojani and Vanini (cf. [LTV04], [LTV03]) about the equivalence of the...