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Research Details

Government debt and private leverage: An extension of the Miller Theorem, Journal of Public Economics

Abstract

This paper shows how government financing decisions can influence the corporate decision to use debt or equity finance. In particular, it is shown that an increase in the stock of taxable government debt reduces the equilibrium quantity of corporate debt, and that an increase in the stock of tax-free government debt reduces the equilibrium quantity of corporate equity. The effects of inflation rate and tax rate changes are also considered.

Type

Article

Author(s)

Robert L. McDonald

Date Published

1983

Citations

McDonald, L. Robert. 1983. Government debt and private leverage: An extension of the Miller Theorem. Journal of Public Economics. 22(3): 303-325.

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