Dynamic Firm and Investor Behaviour under Progressive Personal Taxation

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.- 2.2.1. Exponential growth.- 2.2.2. Multiperiod constraints.- 2.2.3. Dynamic control.- 2.3. A dynamic theory of the firm: investment, finance and dividend.- 2.3.1. The firm’s objective.- 2.3.2. Input and its transformation to output.- 2.3.3. Finance and government.- 2.3.4. Additional assumptions.- 2.3.5. Summary of the basic model and general solution procedure.- 2.3.6. Optimal policy strings.- 2.3.7. Summary and conclusions.- 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.- 3.4.1. Classical system.- 3.4.2. Two rate system.- 3.4.3. Imputation system.- 3.4.4. Integrated system.- 3.4.5. Neutrality of the tax regimes.- 3.5. Leverage and the value of a firm.- 3.5.1. Irrelevancy theorem of Modigliani and Miller.- 3.5.2. Corporate tax correction theorem.- 3.5.3. Leverage related costs.- 3.5.4. Personal taxes.- 3.6. Leverage and market equilibrium.- 3.6.1. Before Tax Theory.- 3.6.2. After Tax Theory.- 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.- 4.5.1. Investor’s objective and the Modigliani-Miller framework.- 4.5.2. Supply adjustment of debt by firms.- 4.5.3. Value of a firm with interior leverage rate.- 4.5.4. Miller versus Gordon.- 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.- 5.5.1. Influence of the fiscal parameters.- 5.5.2. Influence of the financial parameters.- 5.5.3. Interaction of fiscal parameters and the time preference rate.- 5.5.4. Switch of tax regime.- 5.5.5. Initial value and planning horizon.- 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.- 6.4.1. Theory on differential games.- 6.4.2. Modeling the problem under consideration.- 6.4.3. A Pareto solution of the problem.- 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.