Business Tax Policy under Default Risk
22 Pages Posted: 10 Jul 2019
Date Written: July 10, 2019
In this article we use a stochastic model with one representative firm to study business tax policy under default risk. We will show that, for a given tax rate, the government has an incentive to reduce (increase) financial instability and default costs if its objective function is welfare (tax revenue).
Keywords: Capital Structure, Default Risk, Business Taxation and Welfare
JEL Classification: H25, G33, G38
Suggested Citation: Suggested Citation