The Effect of Financial Constraint on Shareholder Taxes and Firm Investments

2012 ◽  
Author(s):  
Zhonglan Dai ◽  
Yue Ying ◽  
Harold H. Zhang
Keyword(s):  
Financial Constraint ◽  
Firm Investments ◽  
Shareholder Taxes

Does Financial Constraint Affect the Relation between Shareholder Taxes and the Cost of Equity Capital?

2013 ◽  
Vol 88 (5) ◽  
pp. 1603-1627 ◽  
Author(s):  
Zhonglan Dai ◽  
Douglas A. Shackelford ◽  
Harold H. Zhang ◽  
Chongyang Chen
Keyword(s):  
Equity Capital ◽  
Data Availability ◽  
Tax Rates ◽  
Financial Constraint ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Partial Explanation ◽  
Shareholder Taxes ◽  
The Cost ◽  
Dividend Tax

ABSTRACT: We argue that reductions in shareholder taxes should lower the cost of equity capital more for financially constrained firms than for other companies. Consistent with this prediction, we find that, following the 1997 (TRA) and the 2003 (JGTRRA) cuts in U.S. individual shareholder taxes, financially constrained firms enjoyed larger reductions in their cost of equity capital than did other firms. The results are consistent with the incidence of the tax reductions falling mostly on firms with both pressing needs for capital and disproportionate ownership by individuals, the only shareholders who benefited from the legislations. The paper provides a partial explanation for the seemingly puzzling finding that, following the unprecedented 2003 reduction in dividend tax rates, non-dividend-paying firms outperformed dividend-paying firms. The results suggest that it was not dividend status that mattered, but financial constraint, a common attribute of non-dividend-paying companies. Data Availability: Data are available from public sources identified in the study.

Magical banking capital: Neo-endogenous money (NEM)

2020 ◽  
Vol 1 (1) ◽  
pp. 27-35
Author(s):  
Sovanbrata Talukdar
Keyword(s):  
Stock Market ◽  
Central Bank ◽  
Financial Market ◽  
Positive Relationship ◽  
Excess Return ◽  
Control Individual ◽  
Financial Constraint ◽  
Imperfect Market ◽  
External Finance ◽  
Endogenous Money

This research emerges with internal financial constraint. How financial constraint may lead to economic recess or back. This financial constraint is different than external finance constraint, and is not due to lack of gold, etc. It explains the positive relationship between excess return in stock market (ERSM) and non-real funding or riskier credit. The matter comes under imperfect market banking. It includes subsequently banking behavior and failure of central bank policy to control individual banks under these circumstances. In addition, it presents measures to get awareness before default comes, as financial default rare and crisis in financial market comes much before that.

scholarly journals Financial constraint, trust, and export performances: firm-level evidence from Africa

2021 ◽  
pp. 1-23
Author(s):  
Maty Konte ◽  
Gideon Ndubuisi
Keyword(s):  
Financial Constraints ◽  
Interpersonal Trust ◽  
Negative Relationship ◽  
Financial Constraint ◽  
African Countries ◽  
Firm Level ◽  
Country Level ◽  
The World Bank ◽  
Negative Effect ◽  
Enterprise Surveys

Abstract Several existing studies have documented a negative relationship between firm financial constraint and export activities but do not attempt to examine factors that could attenuate this relationship in Africa. In this paper, we examine the effect of financial constraint on exports in Africa and explore how the level of trust in countries where firms are located shapes this relationship. We combine the World Bank Enterprise Surveys with different measures of country-level personal and interpersonal trust computed from the Afrobarometer surveys of 19 African countries. Our results show that financial constraints negatively affect export activities. However, this negative effect is attenuated for firms that are located in trust-intensive societies. These findings are robust to different specifications. Interestingly, we find that small and medium-sized enterprises in Africa are more likely to be affected by financial constraints but also more likely to benefit from a higher level of both personal and interpersonal trust, while for larger firms only interpersonal trust matters.

Carry Trade, Exchange Rates, and the Balance-of-Payments

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Nelson H. Barbosa-Filho
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Real Exchange Rate ◽  
Foreign Debt ◽  
Balance Of Payments ◽  
Forward Rate ◽  
Spot Rate ◽  
Financial Constraint ◽  
Carry Trade ◽  
The Real

Abstract This paper presents a partial equilibrium model that integrates interest rate arbitrage with the balance-of-payments constraint to determine the real exchange rate. The sequential logic is the following: (i) carry-trade determines the term premium, with the spot rate showing greater volatility than the forward rate, (ii) uncovered interest rate parity determines the spot rate based on the real exchange rate consistent with a financial constraint, defined as a stable ratio of foreign reserves to foreign debt; and (iii) the trade balance consistent with the financial constraint determines the long-run real exchange rate for a given ratio of domestic to foreign income.

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