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A Contingent Claims Analysis of Partial Loss Offset Taxation and Risk-Taking

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  • Schanbel, Jacques A
  • Roumi, Ebrahim

Abstract

This article models the government's tax claim on the firm in a tax regime where gains and losses are not treated symmetrically as a portfolio of options. Employing option pricing theory to value these options, the impact of changes in firm risk on the market values of the firm's debt and equity is examined. Given the objective of equity value maximization, the firm's risk-taking propensity is gauged under alternative financial and tax scenarios.

Suggested Citation

  • Schanbel, Jacques A & Roumi, Ebrahim, 1990. "A Contingent Claims Analysis of Partial Loss Offset Taxation and Risk-Taking," Public Finance = Finances publiques, , vol. 45(2), pages 304-320.
  • Handle: RePEc:pfi:pubfin:v:45:y:1990:i:2:p:304-20
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    Cited by:

    1. Niemann, Rainer, 2003. "Wie schädlich ist die Mindestbesteuerung? Steuerparadoxa in der Verlustrechnung," Tübinger Diskussionsbeiträge 259, University of Tübingen, School of Business and Economics.
    2. Rainer Niemann, 2004. "Asymmetric Taxation and Cross-Border Investment Decisions," CESifo Working Paper Series 1219, CESifo Group Munich.
    3. van Wijnbergen, Sweder & Estache, Antonio, 1999. "Evaluating the minimum asset tax on corporations: an option pricing approach," Journal of Public Economics, Elsevier, vol. 71(1), pages 75-96, January.
    4. Niemann, Rainer, 2004. "Entscheidungswirkungen von Verlustverrechnungsbeschränkungen bei der Steuerplanung grenzüberschreitender Investitionen," Tübinger Diskussionsbeiträge 276, University of Tübingen, School of Business and Economics.

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