Year: 1995
Author: Raaballe, Johannes
Credit and Capital Markets – Kredit und Kapital, Vol. 28 (1995), Iss. 2 : pp. 270–297
Abstract
This paper considers a one-period economy with both private and corporate investors. The market under consideration consists of three types of bonds (called black, blue and orange), which in one way or another differs with respect to taxation. It is shown that the absence of infinite tax arbitrage opportunities implies that all private investors will end up with the same marginal tax rate. This tax rate is no larger than the smallest corporate marginal tax rate. At the same time all types of bonds except claims selling at par exhibit clienteles. In the literature on bond arbitrage the clienteles are created by means of transaction costs or a (partial) ban on issuing bonds. The exhibition of clienteles in this model hinges on asymmetric taxation. Concluding the paper is a discussion of the effect of introducing previously issued blue bonds into the analysis.
Journal Article Details
Publisher Name: Global Science Press
Language: Multiple languages
DOI: https://doi.org/10.3790/ccm.28.2.270
Credit and Capital Markets – Kredit und Kapital, Vol. 28 (1995), Iss. 2 : pp. 270–297
Published online: 1995-02
AMS Subject Headings: Duncker & Humblot
Copyright: COPYRIGHT: © Global Science Press
Pages: 28
Author Details
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