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Tuesday, 22 April, 2025

Danilo Stojanović: Essays on Firm Dynamics and Taxation

Dissertation Committee:

doc. Marek Kapička, Ph.D.  (CERGE-EI, chair)

PhDr. Ctirad Slavík, Ph.D. (CERGE-EI)

doc. Sergey Slobodyan, Ph.D. (CERGE-EI)

Defense Committee:

prof. Ing. Michal Kejak, M.A., CSc. (CERGE-EI, chair)

Paolo Zacchia, Ph.D. (CERGE-EI)

Jan Babecký, Ph.D. (National Bank of Slovakia)

Meeting link:

https://cerge-ei.webex.com/cerge-ei/j.php?MTID=m4fc35d5d191ac4aea4443c57ec6877aa

Meeting number:

2742 357 5027

Meeting password:

243698

Abstract:

In the first chapter, I show that the U.S. economy benefits from the 2003 tax cuts on dividends and capital gains. In my general equilibrium model, the tax reform reduces the costs of equity issuance, while dividend adjustment costs and a capital-adjusted limit on repurchases drive changes in dividends and repurchases. The tax reform stimulates small, productive firms to increase capital investment by borrowing more from shareholders. Large, less productive firms respond by reducing investment to finance increased payouts to shareholders. This capital reallocation increases aggregate productivity gains, with a part of increased payouts directed to consumption.

In the second chapter, we show that increased firm-specific profit uncertainty reduces capital investment. Quantile regressions reveal this effect is stronger at higher level of investment for firms facing financing constraints compared to those with irreversible capital. Our general equilibrium model evaluates the impact of frictions and their role in transmitting the uncertainty shocks on real and financial outcomes. Firms reduce investment and increase cash holdings to avoid costly borrowing and irreversible capital adjustments.

In the third chapter, we study the influence of changes in firms’ entry, exit and borrowing on the propagation of tax shocks in the U.S. economy. We apply a proxy-SVAR model to isolate exogenous variations in tax changes. The model indicates that corporate income tax cuts increase capital accumulation, which relaxes collateral constraints and provide firms with additional funds. These funds sustain initial tax stimulative effects on aggregate productivity and output growth.

Keywords: Corporate Taxation, Payouts, Heterogeneous Firms, Capital Reallocation, Frictions, Quantile Regressions, Firm Entry and Exit, Borrowing.

Full Text: "Essays on Firm Dynamics and Taxation"