Tax-exempt debt and the capital structure of nonprofit organizations: an application to hospitals
Article Abstract:
The availability of tax-exempt financing provides nonprofit (NP) organizations with their own tax-based incentives to issue debt. In this article, we develop a theoretical model in which NPs gain an indirect arbitrage from tax-exempt debt issuance, constrained by: (1) the requirement that fixed investment exceed tax-exempt debt flows (the project financing constraint), and (2) the constraint against share issuance. These constraints cause them to impute tax benefits to projects that afford access to the tax-exempt bond market. Empirical tests indicate that NP hospitals behave as if they have target levels of tax-exempt debt. Debt targeting is constrained by the availability of capital projects, while excess debt capacity stimulates investment. (Reprinted by permission of the publisher.)
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 1996
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Insider trading, ownership structure, and the market assessment of corporate sell-offs
Article Abstract:
This paper finds that the generally favorable assessment of corporate sell-off decisions is most apparent for closely held firms where insider net-buy activity is prevalent during the prior six-month period. This suggests that insider trader activity and ownership structure information are used by the market in the characterization of sell-off decisions as favorable or unfavorable for investors. (Reprinted by permission of the publisher.)
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 1989
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