Debt and taxes and uncertainty

Article Abstract:

An examination of Merton Miller's research into the equilibrium of corporate debt, corporate taxation and the debt to equity ratios of individual firms (first published in the December 1977 issue of the Journal of Finance) concludes that a company's capital structure affects the beta measures of its overall risk. By introducing uncertainty into Miller's basic model of debt and taxes, it can be shown that corporations merge and consolidate due to tax considerations, and that these mergers make corporate identities less distinct, such that all observations and research regarding corporate debt and taxes should be conducted on a corporate sector basis. A discussion of the research presented focuses on its seventh theorem, which states that companies having similar total variance will evidence smaller corporate debt if their cash flow betas are positive (higher than average).

Models, United States, Taxation, Finance, Criticism and interpretation, Corporations, Corporate finance, Debt financing (Corporations), Debt financing, Capital, Miller, Merton

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The disposition to sell winners too early and ride losers too long: theory and evidence

Article Abstract:

Research into the behavioral characteristics of investors in stocks and mutual funds indicates the validity of theories known as the prospect theory, mental accounting, regret aversion and self-control, which theories combine to explain the tendency of investors to hold losing investments too long and to sell winning investments too quickly. Such investor behavior is also related to tax considerations, which explain the increase in the number of capital losses recognized at year-end each year. The research and the discussion following its presentation draw heavily from behavioral studies reported by D. Kahneman and A. Tversky in 1979, although application of these behavioral studies to investor attitudes is relatively new.

Analysis, Management, Stocks, Investments, Risk management, Mutual funds, Capital investments

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Compensation, Incentives, and the Duality of Risk Aversion and Riskiness

Article Abstract:

The article identifies necessary, sufficient, intuitive, and simple conditions in which incentive schedules increase or decrease risk aversion in agents. Discussion includes calls and puts.

Administration of General Economic Programs, Investment Incentives, Investment Incentives & Guarantees, Venture Analysis, Methods, Risk assessment, Options (Finance), Influence, Comparative analysis, Put options, Call options

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