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We discuss the combined effects of tax convexity, limited liability and leverage on risk-taking. First, we focus on a risk-averse investor who is indifferent to equity-finance a risky asset in a pre-tax setting. We derive the after-tax marginal prices for risk-averse investors. Symmetric...
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rule in real options theory implicitly assumes debt to be neutral. With non-neutrality of debt, an investment threshold is …
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also in an inefficient allocation. Using a combination of theory and experiment, we analyze three different forms of …
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