Effects of Ownership Pattern on Capital Structure: A Special Case of Stock and Mutual Property Liability Insurance Firms (Solvency, Liquidity)
First, the situation in an idealized world without taxes is discussed. It is shown that in the absence of monitoring, both stock and mutual firms will minimize equity. When monitoring is allowed, firms may minimize or maximize equity depending on the circumstances. Under certain other conditions firms may be indifferent to the level of equity.
University of Illinois - Urbana-Champaign
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University of Illinois at Urbana-Champaign