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Does Tax Debt Capacity Matttter?

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Author Info
Hovick Shahnazarian () (Financial Stability Department, Sveriges Riksbank)
Abstract

Nordic corporations to a large extent both pay corporate tax and abstain from utilizing their depreciation allowances to the maximum extent possible. In this paper, we attempt to explain the empirical observation that most firms fails to maximize their tax usage. The model employed takes into account the argument that shareholders for some non-tax reasons have a preference for dividends over retained earnings. Furthermore, we also investigate whether a policy of not claiming the maximum amount of depreciation allowances could be value maximizing for the firm.

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File URL: http://www.taloustieteellinenyhdistys.fi/images/stories/fep/fep0901_3.pdf
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Publisher Info
Article provided by Finnish Economic Association in its journal Finnish Economic Papers.

Volume (Year): 22 (2009)
Issue (Month): 1 (Spring)
Pages: 21-30
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:fep:journl:v:22:y:2009:i:1:p:21-30

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Web page: http://www.taloustieteellinenyhdistys.fi
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Find related papers by JEL classification:
G30 - Financial Economics - - Corporate Finance and Governance - - - General
G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Investment Policy
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
G39 - Financial Economics - - Corporate Finance and Governance - - - Other
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Hovick Shahnazarian, 1997. "A theoretical evaluation of the Swedish corporate tax reform act of 1994," Finnish Economic Papers, Finnish Economic Association, vol. 10(2), pages 67-80, Autumn. [Downloadable!]
  2. Osterberg, William P., 1989. "Tobin's q, investment, and the endogenous adjustment of financial structure," Journal of Public Economics, Elsevier, vol. 40(3), pages 293-318, December. [Downloadable!] (restricted)
  3. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May. [Downloadable!] (restricted)
  4. King, Mervyn A, 1974. "Taxation and the Cost of Capital," Review of Economic Studies, Blackwell Publishing, vol. 41(1), pages 21-35, January. [Downloadable!] (restricted)
  5. Stiglitz, Joseph E., 1973. "Taxation, corporate financial policy, and the cost of capital," Journal of Public Economics, Elsevier, vol. 2(1), pages 1-34, February. [Downloadable!] (restricted)
  6. Auerbach, Alan J, 1983. "Taxation, Corporate Financial Policy and the Cost of Capital," Journal of Economic Literature, American Economic Association, vol. 21(3), pages 905-40, September. [Downloadable!] (restricted)
    Other versions:
  7. Lawrence H. Summers, 1981. "Taxation and Corporate Investment: A q-Theory Approach," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1981-1), pages 67-140. [Downloadable!]
  8. Boadway, Robin W, 1978. "Investment Incentives, Corporate Taxation, and Efficiency in the Allocation of Capital," Economic Journal, Royal Economic Society, vol. 88(351), pages 470-81, September. [Downloadable!] (restricted)
  9. Sandmo, Agnar, 1974. "Investment Incentives and the Corporate Income Tax," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 287-302, Part I, M. [Downloadable!] (restricted)
  10. Boadway, R. W. & Bruce, N., 1979. "Depreciation and interest deductions and the effect of the corporation income tax on investment," Journal of Public Economics, Elsevier, vol. 11(1), pages 93-105, February. [Downloadable!] (restricted)
  11. Kanniainen, Vesa & Sodersten, Jan, 1994. "Costs of monitoring and corporate taxation," Journal of Public Economics, Elsevier, vol. 55(2), pages 307-321, October. [Downloadable!] (restricted)
  12. Eades, Kenneth M., 1982. "Empirical Evidence on Dividends as a Signal of Firm Value," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 17(04), pages 471-500, November. [Downloadable!]
  13. Kanniainen, Vesa & Sodersten, Jan, 1995. "The importance of reporting conventions for the theory of corporate taxation," Journal of Public Economics, Elsevier, vol. 57(3), pages 417-430, July. [Downloadable!] (restricted)
  14. Stiglitz, Joseph E, 1985. "Credit Markets and the Control of Capital," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(2), pages 133-52, May. [Downloadable!] (restricted)
  15. Robin Boadway, 1980. "Corporate Taxation and Investment: A Synthesis of the Neo-Classical Theory," Canadian Journal of Economics, Canadian Economics Association, vol. 13(2), pages 250-67, May. [Downloadable!] (restricted)
    Other versions:
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This page was last updated on 2009-11-27.

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