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Essays on Business Cycles and Corporate Finance /

Record Type:	Electronic resources : Monograph/item
Title/Author:	Essays on Business Cycles and Corporate Finance /Hui-Jun Chen.
Author:	Chen, Hui-Jun,
Description:	1 electronic resource (125 pages)
Notes:	Source: Dissertations Abstracts International, Volume: 86-11, Section: A.
Notes:	Advisors: Khan, Aubhik Committee members: Mihalache, Gabriel; Thomas, Julia.
Contained By:	Dissertations Abstracts International86-11A.
Subject:	Finance.
Online resource:	http://pqdd.sinica.edu.tw/twdaoapp/servlet/advanced?query=32112100
ISBN:	9798314893050

Essays on Business Cycles and Corporate Finance /
Chen, Hui-Jun,

Essays on Business Cycles and Corporate Finance /Hui-Jun Chen. - 1 electronic resource (125 pages)

Source: Dissertations Abstracts International, Volume: 86-11, Section: A.

This dissertation combines two growing literatures in macroeconomics and corporate finance to assess the business cycle implications of secondary capital markets and corporate tax deduction policies.It explores how firms' financial market decisions influence real economic production and examines how real and financial shocks affect the distribution of firms. The essays investigate the role of secondary markets and corporate policies in amplifying or mitigating recessions.Corporate tax deductions are widely employed as countercyclical policies, yet their impact on the business cycle and interactions with other policies remain largely understudied. In the first chapter, "Aggregate Implications of Corporate Taxation over the Business Cycle", I examine the cyclical implications of such deductions by developing a novel dynamic stochastic general equilibrium model in which firms face credit market imperfections and idiosyncratic productivity shocks. In my model, firms' investment decisions are distorted by collateralized borrowing and corporate taxation, and investment expenditures can be deducted from taxable income through targeted or untargeted accelerated depreciation policies. My model quantitatively replicates empirical estimates of the distribution of short-run elasticities of investment across firm size to changes in deduction policies. I show that raising deductions can reduce the severity and persistence of recessions by alleviating capital misallocation for productive firms. Applying my model to the policies in the US 2017 Tax Cuts and Jobs Act, I find that the targeted policy is 30 percent more effective than the untargeted policy in stimulating aggregate output. Furthermore, combining both policies reduces the overall effectiveness by 17 percent, revealing potential inefficiencies in current US tax policy implementation.Chapter two, "Debt Financing, Used Capital Markets and Capital Reallocation", studies the business cycle implications of the interaction between secondary capital markets and credit market imperfections in a general equilibrium model with heterogeneous firms. In the model, prices in secondary capital markets affect the economy through two key channels: changes in the cost of investment and fluctuations in the resale value of collateral. The results show that price adjustments in secondary markets amplify the severity and duration of recessions triggered by financial shocks. The rise in investment costs driven by financial shocks deepens the recessionary trough by a factor of three compared to the effect of collateral value fluctuations.

English

ISBN: 9798314893050Subjects--Topical Terms:

183252
Finance.
Subjects--Index Terms:

Corporate finance

Essays on Business Cycles and Corporate Finance /
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520 $a This dissertation combines two growing literatures in macroeconomics and corporate finance to assess the business cycle implications of secondary capital markets and corporate tax deduction policies.It explores how firms' financial market decisions influence real economic production and examines how real and financial shocks affect the distribution of firms. The essays investigate the role of secondary markets and corporate policies in amplifying or mitigating recessions.Corporate tax deductions are widely employed as countercyclical policies, yet their impact on the business cycle and interactions with other policies remain largely understudied. In the first chapter, "Aggregate Implications of Corporate Taxation over the Business Cycle", I examine the cyclical implications of such deductions by developing a novel dynamic stochastic general equilibrium model in which firms face credit market imperfections and idiosyncratic productivity shocks. In my model, firms' investment decisions are distorted by collateralized borrowing and corporate taxation, and investment expenditures can be deducted from taxable income through targeted or untargeted accelerated depreciation policies. My model quantitatively replicates empirical estimates of the distribution of short-run elasticities of investment across firm size to changes in deduction policies. I show that raising deductions can reduce the severity and persistence of recessions by alleviating capital misallocation for productive firms. Applying my model to the policies in the US 2017 Tax Cuts and Jobs Act, I find that the targeted policy is 30 percent more effective than the untargeted policy in stimulating aggregate output. Furthermore, combining both policies reduces the overall effectiveness by 17 percent, revealing potential inefficiencies in current US tax policy implementation.Chapter two, "Debt Financing, Used Capital Markets and Capital Reallocation", studies the business cycle implications of the interaction between secondary capital markets and credit market imperfections in a general equilibrium model with heterogeneous firms. In the model, prices in secondary capital markets affect the economy through two key channels: changes in the cost of investment and fluctuations in the resale value of collateral. The results show that price adjustments in secondary markets amplify the severity and duration of recessions triggered by financial shocks. The rise in investment costs driven by financial shocks deepens the recessionary trough by a factor of three compared to the effect of collateral value fluctuations.
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