Dynamic Firm and Investor Behaviour Under Progressive Personal Taxation

ISBN-13: 9783540192305 / Angielski / Miękka / 1988 / 215 str.

Geert-Jan C. T. Van Schijndel

Opis

This book aims to include the effects of a progressive personal tax into the deterministic dynamic theory of the firm. To this end the author investigates the impact of a progressive personal tax on the optimal dividend, financing and investment policy of a shareholder-controlled, value-maximising firm. More specifically, the principal aim is the justification of the thesis that during each stage of their evolution, firms will be controlled by investors in different tax brackets. With this aim in mind, the author develops a dynamic equilibrium and portfolio theory under certainty, which considers: - the market value of an arbitrary firm such that no excess demand for or supply of shares exists, - the portfolio selection of differently taxed investors, - the succession of differently taxed investors, who possess the shares of any value-maximizing firm, in the course of time, - the optimal resulting policy string and corresponding evolution of a firm in the course of time.

Spis treści

One: Scope and Outline of the Book.- 1.1. Principal aim of the book.- 1.2. Theory of corporate finance.- 1.3. Dynamics of the firm.- 1.4. Relevance and motivation of the book.- 1.5. Subproblems.- 1.6. Outline of the book.- Two: Models of Dynamic Behaviour.- 2.1. Introduction.- 2.2. Dynamic and -management modelling.- 2.2.1. Exponential growth.- 2.2.2. Multiperiod constraints.- 2.2.3. Dynamic control.- 2.3. A dynamic theory of the firm: investment, finance and dividend.- 2.3.1. The firm’s objective.- 2.3.2. Input and its transformation to output.- 2.3.3. Finance and government.- 2.3.4. Additional assumptions.- 2.3.5. Summary of the basic model and general solution procedure.- 2.3.6. Optimal policy strings.- 2.3.7. Summary and conclusions.- 2.4. Dynamic modeling: survey and conclusions.- Three: Taxation and some Implications.- 3.1. Introduction.- 3.2. Some examples.- 3.3. Fiscal (non) neutrality.- 3.4. Different types of profit and income tax regimes.- 3.4.1. Classical system.- 3.4.2. Two rate system.- 3.4.3. Imputation system.- 3.4.4. Integrated system.- 3.4.5. Neutrality of the tax regimes.- 3.5. Leverage and the value of a firm.- 3.5.1. Irrelevancy theorem of Modigliani and Miller.- 3.5.2. Corporate tax correction theorem.- 3.5.3. Leverage related costs.- 3.5.4. Personal taxes.- 3.6. Leverage and market equilibrium.- 3.6.1. Before Tax Theory.- 3.6.2. After Tax Theory.- 3.7. Conclusion.- Four: Financial Market Equilibrium under Taxation and Tax Induced Clienteles Effects.- 4.1. Introduction.- 4.2. Dividend and leverage irrelevancy theorem under personal taxation.- 4.3. Dividend and financial leverage clienteles.- 4.4. Equilibrium market value reconsidered by Gordon.- 4.5. Discussion and extension of Gordon’s framework.- 4.5.1. Investor’s objective and the Modigliani-Miller framework.- 4.5.2. Supply adjustment of debt by firms.- 4.5.3. Value of a firm with interior leverage rate.- 4.5.4. Miller versus Gordon.- 4.6. A corrected equilibrium approach.- 4.7. Tax induced investment clienteles.- 4.8. Conclusion.- Five: Optimal Policy String of a Single Value Maximizing Firm under Personal Taxation.- 5.1. Introduction.- 5.2. The model.- 5.3. Optimal solution.- 5.4. Further analysis.- 5.5. Sensitivity analysis.- 5.5.1. Influence of the fiscal parameters.- 5.5.2. Influence of the financial parameters.- 5.5.3. Interaction of fiscal parameters and the time preference rate.- 5.5.4. Switch of tax regime.- 5.5.5. Initial value and planning horizon.- 5.6. Conclusion.- Six: Individual Investor Behaviour under Equilibrium Conditions.- 6.1. Introduction.- 6.2. Free end point approach under equilibrium conditions.- 6.3. A competitive approach.- 6.4. A differential game approach.- 6.4.1. Theory on differential games.- 6.4.2. Modeling the problem under consideration.- 6.4.3. A Pareto solution of the problem.- 6.5. Conclusion.- Seven: A Time Dependent Equilibrium Approach under a Progressive Personal Tax.- 7.1. Introduction.- 7.2. Optimal behaviour of an equity financed firm.- 7.3. Valuation of the firm’s policy string.- 7.4. Market equilibrium approach.- 7.5. Final results and conclusion.- Eight: Conclusions.- Appendix A1: The Solution of the Optimal Control Problems Formulated in the Chapters Two and Five.- Appendix A2: Derivation of a Particular Expression in Chapter Five.- Appendix B1: Derivation of Optimal Switching Point.- Appendix B2: Solution of Optimal Control Problem Formulated in Chapter Six.- Appendix B3: A Pareto Solution of a Differential Game.- Appendix C: Derivation of a Particular Expression in Chapter Seven.- List of Symbols.- References.