This paper studies the ownership connection between two units that share a common
controlling entity. Our results generate diverse organizations, including the horizontal
groups of US family firms and the hierarchical ownership of both multinationals and
European groups. The driver of ownership is the optimal capital structure associated with the tax-bankruptcy trade-off.
We also examine optimal mutations in response to dividend taxes, to caps on interest deductions and to ?no bailout? rules.
We find that potential conflicts between majority and minority shareholders strongly influence how dividends respond to taxes. Examining the population of firms with proprietary microdata on all family relationships and a million individual tax...Read more
This paper considers cost-reducing R&D investment with spillovers in a Cournot oligopoly with overlapping ownership. We show that overlapping ownership leads to internalization of rivals’ profits by firms and find that, for demand not too...Read more
Using hand-collected data on 691 corporate inversions from 11 home countries into 45 host destinations in 1996-2013, we document that corporations invert to destinations with lower tax rates and similar governance standards. Indeed, passage of...Read more
For the last decade economists have been preoccupied with the decline in bank financing to small businesses and entrepreneurs. This effort has produced a better understanding of the obstacles to external financing. We examine the market and ...Read more