Marginal versus Average Beta of Equity under Corporate Taxation

This file is part of IDEAS, which uses RePEc data

Marginal versus Average Beta of Equity under Corporate Taxation

Author Info

Lund, Diderik () (Dept. of Economics, University of Oslo)

Additional information is available for the following registered author(s):

Diderik Lund

Abstract

Even for fully equity-financed firms there may be substantial effects of taxation on the after-tax cost of capital. Among the few studies of these effects, even fewer identify all effects correctly. When marginal investment is taxed together with inframarginal, marginal beta differs from average if there are investmentrelated deductions like depreciation. To calculate asset betas, one should not only "unlever" observed equity betas, but "untax" and "unaverage" them. Risky tax claims are valued as call options, with closed-form solutions for the exercise probability. Results have practical relevance for multinationals operating under different tax systems.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

Publisher Info
Paper provided by Oslo University, Department of Economics in its series Memorandum with number 12/2009.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 56 pages
Date of creation: 09 Jun 2009
Date of revision:
Handle: RePEc:hhs:osloec:2009_012

Contact details of provider:
Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Email:
Web page: http://www.oekonomi.uio.no/indexe.html
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Rhiana Bergh-Seeley).

Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Investment Policy
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

This paper has been announced in the following NEP Reports:

NEP-ACC-2009-09-11 (Accounting & Auditing)
NEP-ALL-2009-09-11 (All new papers)
NEP-CFN-2009-09-11 (Corporate Finance)

Statistics

Access and download statistics

Did you know? You can import bibliographic info in various formats into you bibliographic tool, or just into your word processor. See under "publisher info" on each abstract page.

This page was last updated on 2009-11-26.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.