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Taxation and corporate financial policy

In: Handbook of Public Economics

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  • Auerbach, Alan J.

Abstract

This chapter reviews the theory and evidence regarding the impact of taxation on corporate financial policy. Starting from a basic characterization of the classical corporate income tax and its effects, the analysis focuses on three areas of research: equity policy, debt-equity decisions, and choices regarding ownership structure and organizational form. The discussion stresses the distinction between nominal and more fundamental financial differences -- for example, in the relationship between borrowing and leasing -- and that financial policy involves choices not only among different underlying policies but also among characterizations of a given policy. The final section offers some brief reflections on the implications of continuing financial innovation.

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This chapter was published in:

  • A. J. Auerbach & M. Feldstein (ed.), 2002. "Handbook of Public Economics," Handbook of Public Economics, Elsevier, edition 1, volume 3, number 3.
    This item is provided by Elsevier in its series Handbook of Public Economics with number 3-19.

    Handle: RePEc:eee:pubchp:3-19

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