Dynamic Firm and Investor Behaviour under Progressive Personal Taxation

by Geert-Jan C.T.van Schijndel

Overview

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.

Product Details

ISBN-13:	9783540192305
Publisher:	Springer Berlin Heidelberg
Publication date:	06/13/1988
Series:	Lecture Notes in Economics and Mathematical Systems , #305
Edition description:	Softcover reprint of the original 1st ed. 1988
Pages:	215
Product dimensions:	6.69(w) x 9.61(h) x 0.02(d)

Table of Contents

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.- 2.3. A dynamic theory of the firm: investment, finance and dividend.- 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.- 3.5. Leverage and the value of a firm.- 3.6. Leverage and market equilibrium.- 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.- 4.6. 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.- 5.6. 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.- 6.5. 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.