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on Corporate Finance |
| By: | John R. Graham; Hyunseob Kim |
| Abstract: | We investigate how the length of the net operating loss carryback period affects corporate liquidity and marginal tax rates. We estimate that extending the carryback period from two to five years, as recently proposed in President Obama’s budget blueprint, would provide $19 ($34) billion of additional liquidity to the corporate sector for 2008 (2009). Our calculations imply that the benefits of the extended carryback period would be concentrated in the homebuilding, automobile, and financial industries. Extending the carryback period would increase the marginal tax rate of loss firms by more than 200 basis points on average, which all else equal would lead corporations to use an additional $8 ($10) billion of debt and reduce tax payments by another $1.2 ($1.5) billion in 2008 (2009). Overall, the tax break proposed by the Obama administration would have a significant liquidity effect on corporations suffering large losses in recent years. If the tax proposal were extended to include TARP firms, the liquidity effect would triple in size. |
| JEL: | G32 H25 K34 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15177&r=cfn |
| By: | Bo Becker; Zoran Ivkovich; Scott Weisbenner |
| Abstract: | We exploit demographic variation to identify the effect of dividend demand on firm payout policy. Retail investors tend to hold local stocks and older investors prefer dividend-paying stocks. Together, these tendencies generate geographically-varying demand for dividends. Firms headquartered in areas in which seniors constitute a large fraction of the population are more likely to pay dividends, initiate dividends, and have higher dividend yields. However, the fraction of seniors is uncorrelated with share repurchases, investment, or profitability, suggesting that geographic variation in dividend payout is not driven by some unmeasured firm characteristic affecting the ability or willingness to distribute cash to shareholders. We also provide indirect evidence as to why firm managers may cater to the demand for dividends from local seniors. Overall, these results suggest that the composition of a firm’s investor base affects corporate policy choices. |
| JEL: | G30 G35 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15175&r=cfn |
| By: | Alfredo Gigliobianco (Bank of Italy, Structural Studies Department); Claire Giordano (Bank of Italy, Structural Studies Department); Gianni Toniolo (Duke University) |
| Abstract: | Between the 1880s and the 1930s, three "regulatory cycles" can be identified in Italy. In the underlying model, each financial crisis gives rise to a regulatory change, which is circumvented in due time by financial innovation, that can then contribute to the outbreak of a new financial crisis. In Italy, overtrading of the banks of issue in the 1880s contributed to the 1888-1894 financial crisis, which yielded regulation concerning only these banks and restricting their activity. The German-type universal banks, created at the turn of the century and unconstrained in their undertakings, were at the core of the 1907 and the 1921-1923 crises. These led to a banking law in 1926 which, however, was born obsolete, in that it was not aimed at regulating universal banking as it had developed until then, but it contained general provisions regarding the whole range of deposit-taking institutions. Finally, the evolutionary adaptation of the universal banks into holding companies, not taken into account by the preceding law, contributed to the 1931-1934 banking crisis, followed by the 1936 bank legislation. |
| JEL: | G28 N20 N40 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:confpa:confpa_gig_ton_gio&r=cfn |