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Debt Issuance in the Face of Tax Loss Carryforwards


  • Anne-Marie Anderson
  • Nandu Nayar


We examine the market impact of issuances of public and private debt by firms with sizeable tax loss carryforwards (TLCFs). Public issuances are met with a significantly negative stock price reaction, while private placements are associated with a positive marginally significant stock price reaction. After controlling for asymmetric information proxies, the stock price reaction to the debt issuance is more negative, the larger the TLCF. The evidence suggests that debt financing is suboptimal when issuers have large TLCFs, which in turn, supports the relevance of taxes for debt usage. Copyright (c) 2010, The Eastern Finance Association.

Suggested Citation

  • Anne-Marie Anderson & Nandu Nayar, 2010. "Debt Issuance in the Face of Tax Loss Carryforwards," The Financial Review, Eastern Finance Association, vol. 45(1), pages 105-127, February.
  • Handle: RePEc:bla:finrev:v:45:y:2010:i:1:p:105-127

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    Cited by:

    1. Sudip Ghosh & Christine Harrington & Walter Smith, 2011. "Do windfall non-debt tax shields from acquisitions affect corporate debt issues?," Managerial Finance, Emerald Group Publishing, vol. 37(6), pages 537-552, May.

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