IDEAS home Printed from https://ideas.repec.org/a/sae/pubfin/v37y2009i6p732-749.html
   My bibliography  Save this article

Investment Under Tax Policy Uncertainty: A Neoclassical Approach

Author

Listed:
  • Alaa El-Shazly

    (Department of Economics, Faculty of Economics and Political Science, Cairo University, Cairo, Egypt, ashazly@cics.feps.eun.eg)

Abstract

This article studies the impact of investment irreversibility, delivery lags, and adjustment costs on the firm’s optimal investment policy in a world of uncertainty. The source of uncertainty is a future change in the corporate profits tax where both the timing of this event and the size of associated adjustment in the tax benefit of investing are random. Such a tax uncertainty is particularly evident in reform economies whose authorities consider significant reductions in the corporate tax rate to stimulate business life. It is shown that greater transparency on tax policy promotes the firm’s expected net worth and the capital accumulation process.

Suggested Citation

  • Alaa El-Shazly, 2009. "Investment Under Tax Policy Uncertainty: A Neoclassical Approach," Public Finance Review, , vol. 37(6), pages 732-749, November.
  • Handle: RePEc:sae:pubfin:v:37:y:2009:i:6:p:732-749
    as

    Download full text from publisher

    File URL: http://pfr.sagepub.com/content/37/6/732.abstract
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Richard Cebula, 2012. "Contemporary Economics and Policy Issues in the U.S," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 18(2), pages 131-137, May.
    2. repec:kap:iaecre:v:18:y:2012:i:2:p:131-137 is not listed on IDEAS
    3. Zuzana Machová & Igor Kotlán, 2015. "Právní jistota - možný problém daňové politiky vyspělých zemí?
      [Legal Certainty - Possible Problem of Tax Policy in Developed Countries?]
      ," Politická ekonomie, University of Economics, Prague, vol. 2015(7), pages 833-846.

    More about this item

    Keywords

    tax policy; uncertainty; investment;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:37:y:2009:i:6:p:732-749. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SAGE Publications). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.