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Tax, Stimuli of Investment and Firm Value

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  • Maoz, Yishay

Abstract

Pennings (2000) has shown that the government can speed-up investment by subsidizing the potential investing firm's entry cost while taxing the future proceeds from the investment, so as to render the net expected value of its subsidy program zero. This note argues that while speeding-up the investment timing, this subsidy-tax program also lowers the value of the firm and therefore will be rejected by it.

Suggested Citation

  • Maoz, Yishay, 2007. "Tax, Stimuli of Investment and Firm Value," MPRA Paper 5596, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:5596
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    References listed on IDEAS

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    1. Robert McDonald & Daniel Siegel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(4), pages 707-727.
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    Cited by:

    1. Luca Corato, 2016. "Investment stimuli under government present-biased time preferences," Journal of Economics, Springer, vol. 119(2), pages 101-111, October.
    2. Vitor Carvalho & Diogo Barbosa & Paulo Jorge Pereira, 2013. "The interaction between firms and Government in the context of investment decisions: a real options approach," EcoMod2013 5390, EcoMod.
    3. Cesare Dosi & Michele Moretto & Roberto Tamborini, 2019. "Balanced-Budget Fiscal Stimuli of Investment and Welfare Value," EconPol Working Paper 28, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    4. Kai Chang & Ning Lu & Ze Sheng Li & Yi Ran Wang, 2021. "The combined impacts of fiscal and credit policies on green firm's investment opportunity: Evidences from Chinese firm‐level analysis," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(7), pages 1822-1835, October.
    5. Dimitrios Zormpas, 2021. "Jointly Held Investment Options and Vertical Relationships," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(4), pages 513-530, June.

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    More about this item

    Keywords

    Investment; Uncertainty; Option Value;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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