Despite the seminal work by Modigliani and Miller (1958) and Miller (1977) highlighting the importance of differences in marginal tax rates for the optimal debt policy of firms, the empirical literature on capital structure choice has thus far not been very successful in identifying the importance of the relative tax advantage of debt with respect to retained earnings for firm leverage (Rajan and Zingales, 1995). This paper shows that national tax policies do matter for corporate debt structures, using a unique dataset on internal debt positions of multinational firms and their foreign subsidiaries.
In most countries, interest expenses are deductible for corporate tax purposes while dividends have to be paid out of net-of-tax corporate income. Most tax systems thus favor debt finance over equity finance, but to different degrees given the dispersion in top statutory corporate tax rates. In determining their financial structure, purely domestic firms only have to deal with the domestic tax system. Multinational firms, however, face the more complicated choice of determining their overall indebtedness and the allocation of their debts to the parent firm and the subsidiaries across all countries in which the multinational operates. As a consequence, the financial structure of a multinational firm is expected to reflect the tax systems of all the countries where it operates.
Research and development efforts within the Grid community have produced protocols, services, and tools that address the challenges arising when we seek to build scalable virtual organizations (VOs). For the purpose of this paper, a virtual organization is defined as a set of individuals and/or institutions sharing resources and services under a set of rules and policies governing the extent and conditions for that sharing. As stated in [ANA], “the sharing that Grid environments are concerned with is not primarily file exchange but rather direct access to computers, software, data, and other resources, as is required by a range of collaborative problem-solving and resource-brokering strategies emerging in industry, science, and engineering. This sharing is, necessarily, highly controlled, with resource providers and consumers defining clearly and carefully just what is shared, who is allowed to share, and the conditions under which sharing occurs.”
What distinguishes a VO from a classical organization is that it may gather individuals and/or institutions that have agreed to share resources and otherwise collaborate on an ad-hoc, dynamic basis, while they continue to belong to different real organizations, each governed by their own set of internal rules and policies. This poses a challenge when combined with the fact that an individual or institution may be a member of several VOs simultaneously. From a security point of view, one is thus confronted with protection domains that may superpose, straddle, and intersect one another in many different ways. Within this context, we require interoperability among domains while maintaining a clear separation of the security policies and mechanisms deployed by both virtual and real organizations.
This paper studies the role of agency frictions and costly external finance in the dynamics of labor markets. The focus is on how credit-market frictions may amplify neutral technology shocks. The environment in which we study this question brings together a benchmark business-cycle model of financial frictions and a benchmark business-cycle model of labor search and-matching frictions. The main result is that aggregate technology shocks can lead to large cyclical fluctuations of labor market quantities in particular, unemployment, vacancies, and labor-market tightness, the quantities identified by Shimer (2005) as failing to be explained by standard search models. Our framework quantitatively accounts for the empirically observed large fluctuations of labor markets very well, even though it is calibrated to the cyclical nature of financial conditions rather than to the cyclicality of labor markets.
