Two essays on security valuation and investor clienteles



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This dissertation explores the effects of corporate financial decisions on: (1) the market valuation of different securities, as well as firms with different capital structures, and (2) the portfolio behavior of investors, in the presence of heterogeneous personal income taxes. The objective is to clarify and reconcile various results and conjectures found in recent literature regarding these issues. The dissertation consists of two papers. The first paper, "An Examination of the Effects of Heterogeneous Personal Taxes on Securities Valuation and Investors Portfolio Behavior," employes a general equilibrium mean-variance model to show how differential taxation across sources of income results in asymmetric valuation of securities, and how differential taxation across investors results in tax-induced portfolio preferences. The analysis shows that the inconsistencies in the existing literature regarding the issue of "leverage irrelevancy" can be explained by differences in underlying assumptions. [...]



Securities--United States