The puzzle of financial leverage clienteles

Article Abstract:

Common stock of publicly traded corporations with high debt ratios appears to be held by investors with relatively low marginal taxes in general, while the stock of firms with low debt ratios is held more often by investors in high tax brackets. It has been argued previously by several different researchers that in particular equilibria, such as those described by Miller, such a breakdown in clientele should be evident. Here is its proposed that standard portfolio theory does not imply financial leverage clienteles for publicly-traded firms, with the empirical relationship between investor tax rates and leverage ratios explained by the existence of dividend clienteles and a positive relationship between dividend yield and leveraged ratios.

Models, Taxation, Stocks, Corporate taxes, Securities, Investments, Corporations, Investors, Securities taxes

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Some empirical estimates of the risk structure of interest rates

Article Abstract:

This paper investigates the risk structure of interest rates using pure discount bonds. The most striking feature of our estimates of default-risk premia is the resemblance of their time profile to the theoretical time profile obtained by Merton (1974). (Reprinted by permission of the publisher.)

Analysis, Risk (Economics), Interest rates, Zero coupon securities, Finance, Corporate bonds

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