Taxation and the Cost of Capital: The "Old" View, the "New" View and Another View
AbstractThis paper is a critical survey of the recent literature on the tax effects on corporate finance and investment decisions. It corrects a common misinterpretation of the "new" view, emphasizes the cushion effect of financial optimization, dismisses the view that optimizing firms behave as if they maximized their cost of finance, studies the role of immature firms, questions the alleged support of the old view by the occurrence of share repurchases, comments on a potential US budget compromise, and suggests the idea of a Political Miller Equilibrium.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3501.
Date of creation: Dec 1991
Date of revision:
Publication status: published as Hans-Werner Sinn. "Taxation and the Cost of Capital: The "Old" View, the "New" View, and Another View," in David Bradford, editor, "Tax Policy and the Economy, Volume 5" The MIT Press (1991)
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Other versions of this item:
- Hans-Werner Sinn, 1991. "Taxation and the Cost of Capital: The "Old" View, the "New" View, and Another View," NBER Chapters, in: Tax Policy and the Economy, Volume 5, pages 25-54 National Bureau of Economic Research, Inc.
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