Tax-exempt debt and the capital structure of nonprofit organizations: an application to hospitals

Article Abstract:

The availability of tax-exempt financing provides nonprofit (NP) organizations with their own tax-based incentives to issue debt. In this article, we develop a theoretical model in which NPs gain an indirect arbitrage from tax-exempt debt issuance, constrained by: (1) the requirement that fixed investment exceed tax-exempt debt flows (the project financing constraint), and (2) the constraint against share issuance. These constraints cause them to impute tax benefits to projects that afford access to the tax-exempt bond market. Empirical tests indicate that NP hospitals behave as if they have target levels of tax-exempt debt. Debt targeting is constrained by the availability of capital projects, while excess debt capacity stimulates investment. (Reprinted by permission of the publisher.)

Taxation, Finance, Debt, Nonprofit organizations, Tax exemption, Tax exemptions

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Insider trading, ownership structure, and the market assessment of corporate sell-offs

Article Abstract:

This paper finds that the generally favorable assessment of corporate sell-off decisions is most apparent for closely held firms where insider net-buy activity is prevalent during the prior six-month period. This suggests that insider trader activity and ownership structure information are used by the market in the characterization of sell-off decisions as favorable or unfavorable for investors. (Reprinted by permission of the publisher.)

Analysis, Insider trading in securities, Insider trading (Securities), Financial research

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