Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments January 1, 2021 erstellt
Beschreibung:
This paper examines the capital structure of the closed-end funds, under the leverage regulatory constraint (Investment Company Act of 1940). The act imposes a 33 percent leverage constraint on the closed-end funds. We theoretically model the funds’ optimal leverage under the constraint, which produces leverage close empirical observations. Due to the constraint, we find that closed-end funds lose, on average, 1.59 percent of their value from potential net tax-shield benefits ($49.8 billion total in our sample). The loss penalizes funds with low-risk investments four times more than otherwise risky funds; risky funds endogenously borrow with caution regardless of the constraint