The Marginal Source of Finance

This paper addresses the ongoingdebate on which view of equity, traditional or new, that best describes firm behavior. According to the traditional view, the marginal source of finance is new equity, whereas under to the new view, marginal financing comes from retained earnings. In the theoretical part, we set up a model where the firm faces a cost of adjusting the dividend level because of an aggravated free cash flow problem. The existence of such a cost - which has been used in arguing the traditional view - does not invalidate the core of the new view, namely that the marginal investment may be financed with retained earnings. The combination of costly changes in dividends and retained earnings as the marginal source of funds actually defines an extended new view of equity. In the empirical part, we test the implication of the new view that dividends and investments are negatively related. The overall conclusion is that the implication of the new view is supported for traded Swedish firms during 1980-98.The traditional view of equity; the new view of equity; financing policy; payout policy

Mitigating Double Taxation in an Open Economy

The interaction of various methods of mitigating economic and international double taxation of corporate source income is studied within a standard neoclassical model of firm behavior. The main purpose is to determine to what extent methods effective in mitigating economic double taxation in a closed economy remain useful in an open economy where the firm's marginal investor is a foreigner. While a cut in the statutory corporate tax rate invariably reduces the cost of capital, the impact of the imputation and split rate systems is shown to depend on whether the credit or exemption method is used in mitigating international double taxation, and the precise design of these methods.Corporate taxation; double taxation; cost of capital; open economy

Dividend Taxation, Share Repurchases and the Equity Trap

This paper reconsiders the effects of dividend taxation. Particular attention is paid to the form of the “equity trap”, that is, the extent to which cash paid to the shareholders must be taxed as dividends. Our analysis shows that Sinn’s (1991) criticism of the well-known King and Fullerton (1984) methodology for underestimating the cost of new share issues amounts to a misleading comparison across two different regimes for the equity trap. Contrary to Sinn, we find that when dividends are paid following a new issue, as assumed by King-Fullerton, the cost of capital is higher than is the case when no dividends are paid.dividend taxation, share repurchases, equity trap, cost of capital, nucleus theory, growth path

The Equity Trap, the Cost of Capital and the Firm’s Growth Path

This paper reconsiders Sinn’s (1991) nucleus theory of the corporation by comparing two different regimes for the equity trap. In the first of these, all cash paid to the shareholders is taxed as dividends, in the second, shareholders are allowed a tax-free return of capital contributed through new issues. A substantial difference is found between the regimes in the size of initial equity injections, although in both regimes, no dividends are paid until a new long-run equilibrium is reached. Contrary to Sinn, we find that with optimal behavior, the cost of new equity is lower than suggested by conventional formulae.dividend taxation, equity trap, cost of capital, nucleus theory, growth path

Economic Effects of Taxing Closed Corporations under a Dual Income Tax

Under the Nordic dual income tax system, the taxpayer's total tax bill depends not only on his total income but also on the division of that income between capital income and labor income. This has created new room for tax avoidance, especially for active owners of (closed) corporations. For that reason the Nordic governments have enacted special income-splitting rules and this paper examines the economic effects of these rules. The Swedish scheme of taxing closed corporations is shown to be neutral in its impact on the allocation of resources between closely and widely held corporations, and the cost of capital is invariant to the rate at which capital income is imputed to the owner. The Finnish system rather increases the attractiveness of investing in closed corporations, while the Norwegian scheme may or may not cause the cost of capital to be different from that of widely held corporations. Finally, for Swedish tax rules, we show that the owner's labor supply may decrease as a response to a more lenient tax treatment.Dual income taxation; Tax avoidance; Corporate taxation; Cost of capital

The use of historical collections to estimate population trends: a case study using Swedish longhorn beetles (Coleoptera: Cerambycidae)

Long term data to estimate population trends among species are generally lacking. However, Natural History Collections (NHCs) can provide such information, but may suffer from biases due to varying sampling effort. To analyze population trends and range-abundance dynamics of Swedish longhorn beetles (Coleoptera: Cerambycidae), we used collections of 108 species stretching over 100 years. We controlled for varying sampling effort by using the total number of database records as a reference for non-red-listed species. Because the general frequency of red-listed species increased over time, a separate estimate of sampling effort was used for that group. We observed large interspecific variation in population changes, from declines of 60\% to several hundred percent increases. Most species showed stable or increasing ranges, whereas few seemed to decline in range. Among increasing species, rare species seemed to expand their range more than common species did, but this pattern was not observed in declining species. Historically, rare species did not seem to be at larger risk of local extinction, and population declines were mostly due to lower population density and not loss of sub-populations. We also evaluated the species' declines under IUCN red-list criterion A, and four currently not red-listed species meet the suggested threshold for Near Threatened (NT). The results also suggested that species' declines may be overlooked if estimated only from changes in species range

Ability of vaccine strain induced antibodies to neutralize field isolates of caliciviruses from Swedish cats

Background: Feline calicivirus (FCV) is a common cause of upper respiratory tract disease in cats worldwide. Its characteristically high mutation rate leads to escape from the humoral immune response induced by natural infection and/or vaccination and consequently vaccines are not always effective against field isolates. Thus, there is a need to continuously investigate the ability of FCV vaccine strain-induced antibodies to neutralize field isolates. Methods: Seventy-eight field isolates of FCV isolated during the years 2008–2012 from Swedish cats displaying clinical signs of upper respiratory tract disease were examined in this study. The field isolates were tested for cross-neutralization using a panel of eight anti-sera raised in four pairs of cats following infection with four vaccine strains (F9, 255, G1 and 431). Results: The anti-sera raised against F9 and 255 neutralised 20.5 and 11.5 %, and 47.4 and 64.1 % of field isolates tested, respectively. The anti-sera against the more recently introduced vaccine strains G1 and 431 neutralized 33.3 and 70.5 % and 69.2 and 89.7 %, respectively. Dual vaccine strains displayed a higher cross-neutralization. Conclusions: This study confirms previous observations that more recently introduced vaccine strains induce antibodies with a higher neutralizing capacity compared to vaccine strains that have been used extensively over a long period of time. This study also suggests that dual FCV vaccine strains might neutralize more field isolates compared to single vaccine strains. Vaccine strains should ideally be selected based on updated knowledge on the antigenic properties of field isolates in the local setting, and there is thus a need for continuously studying the evolution of FCV together with the neutralizing capacity of vaccine strain induced antibodies against field isolates at a national and/or regional level

Approximate dynamic fault tree calculations for modelling water supply risks

Traditional fault tree analysis is not always sufficient when analysing complex systems. To overcome the limitations dynamic fault tree (DFT) analysis is suggested in the literature as well as different approaches for how to solve DFTs. For added value in fault tree analysis, approximate DFT calculations based on a Markovian approach are presented and evaluated here. The approximate DFT calculations are performed using standard Monte Carlo simulations and do not require simulations of the full Markov models, which simplifies model building and in particular calculations. It is shown how to extend the calculations of the traditional OR- and AND-gates, so that information is available on the failure probability, the failure rate and the mean downtime at all levels in the fault tree. Two additional logic gates are presented that make it possible to model a system’s ability to compensate for failures. This work was initiated to enable correct analyses of water supply risks. Drinking water systems are typically complex with an inherent ability to compensate for failures that is not easily modelled using traditional logic gates. The approximate DFT calculations are compared to results from simulations of theorresponding Markov models for three water supply examples. For the traditional OR- and AND-gates, and one gate modelling compensation, the errors in the results are small. For the other gate modelling compensation, the error increases with the number of compensating components. The errors are, however, in most cases acceptable with respect to uncertainties in input data. The approximate DFT calculations improve the capabilities of fault tree analysis of drinking water systems since they provide additional and important information and are simple and practically applicable

Economic Effects of Taxing Closed Corporations under a Dual Income Tax

Under the Nordic dual income tax system, the taxpayer's total tax bill depends not only on his total income but also on the division of that income between capital income and labor income. This has created new room for tax avoidance, especially for active owners of (closed) corporations. For that reason the Nordic governments have enacted special income-splitting rules and this paper examines the economic effects of these rules. The Swedish scheme of taxing closed corporations is shown to be neutral in its impact on the allocation of resources between closely and widely held corporations, and the cost of capital is invariant to the rate at which capital income is imputed to the owner. The Finnish system rather increases the attractiveness of investing in closed corporations, while the Norwegian scheme may or may not cause the cost of capital to be different from that of widely held corporations. Finally, for Swedish tax rules, we show that the owner's labor supply may decrease as a response to a more lenient tax treatment