Debt Decisions Research Articles

Corporate Debt Decisions: A New Analytical Framework

The Journal of FinanceVolume 33, Issue 5 p. 1297-1315 Article CORPORATE DEBT DECISIONS: A NEW ANALYTICAL FRAMEWORK John Caks, John CaksWharton Doctoral Fellow, University of Pennsylvania. The author thanks Stewart Myers for his very helpful suggestions.Search for more papers by this author John Caks, John CaksWharton Doctoral Fellow, University of Pennsylvania. The author thanks Stewart Myers for his very helpful suggestions.Search for more papers by this author First published: December 1978 https://doi.org/10.1111/j.1540-6261.1978.tb03421.xCitations: 3 Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Citing Literature Volume33, Issue5December 1978Pages 1297-1315 RelatedInformation

COLLECTIVE DECISION RULES AND LOCAL DEBT CHOICE: A TEST OF THE MEDIAN-VOTER HYPOTHESIS

Although the median-voter hypothesis has been around for nearly fifty years, direct tests of the hypothesis have not been forthcoming. This study first develops a model to consider the impact of alternative voting rules on the desired level of debt in a community. If the median-voter hypothesis holds, then voter preferences should dominate agent preferences and debt levels should be the same whether a simple-majority referendum is employed or whether the debt decision is left to local public officials. The model also predicts that when some fraction greater than a majority is required for referendum approval then debt levels in the community will be lower. Cross-section empirical results for the fifty states supports both sets of hypotheses.