Taxation, Corporate Financial Policy and the Cost of Capital
The cost of capital plays an important role in the allocation of resources among competing uses in a decentralized market system. The purpose of this paper is to organize and present what is known and what is hypothesized about the effects of taxation on the incentive to invest, via the cost of capital,taking full account of important issues that arise independently from the question of taxation. Included in the analysis is a discussion of empirical findings about the interaction of inflation and taxation in influencing the incentive to invest, and a treatment of taxation and uncertainty.
|Date of creation:||Nov 1982|
|Date of revision:|
|Publication status:||published as Auerbach, Alan J. "Taxation, Corporate Financial Policy and the Cost of Capital." The Journal of Economic Literature, Vol. 21, No. 3, (September 1983) , pp. 905-940.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lewellen, Wilbur G, et al, 1978. "Some Direct Evidence on the Dividend Clientele Phenomenon," Journal of Finance, American Finance Association, vol. 33(5), pages 1385-99, December.
- Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
- J. S. S. Edwards & M. J. Keen, 1984. "Wealth Maximization and the Cost of Capital: A Comment," The Quarterly Journal of Economics, Oxford University Press, vol. 99(1), pages 211-214.
- DeAngelo, Harry & Masulis, Ronald W., 1980. "Optimal capital structure under corporate and personal taxation," Journal of Financial Economics, Elsevier, vol. 8(1), pages 3-29, March.
- Michael C. Jensen, 1972. "Capital Markets: Theory and Evidence," Bell Journal of Economics, The RAND Corporation, vol. 3(2), pages 357-398, Autumn.
- Steinar Ekern & Robert Wilson, 1974. "On the Theory of the Firm in an Economy with Incomplete Markets," Bell Journal of Economics, The RAND Corporation, vol. 5(1), pages 171-180, Spring.
- Roger H. Gordon, 1985. "Taxation of Corporate Capital Income: Tax Revenues Versus Tax Distortions," The Quarterly Journal of Economics, Oxford University Press, vol. 100(1), pages 1-27.
- Sudipto Bhattacharya, 1980. "Nondissipative Signaling Structures and Dividend Policy," The Quarterly Journal of Economics, Oxford University Press, vol. 95(1), pages 1-24.
- Swan, Peter L, 1970. "Durability of Consumption Goods," American Economic Review, American Economic Association, vol. 60(5), pages 884-94, December.
- Lippman, Steven A. & McCall, John J., 1981. "Progressive taxation in sequential decisionmaking : Deterministic and stochastic analysis," Journal of Public Economics, Elsevier, vol. 16(1), pages 35-52, August.
- Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-87, September.
- Mervyn A. King, 1974. "Taxation and the Cost of Capital," Review of Economic Studies, Oxford University Press, vol. 41(1), pages 21-35.
- Kopcke, Richard W, 1981. "Inflation, Corporate Income Taxation, and the Demand for Capital Assets," Journal of Political Economy, University of Chicago Press, vol. 89(1), pages 122-31, February.
- Shoven, John B, 1976. "The Incidence and Efficiency Effects of Taxes on Income from Capital," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1261-83, December.
- J. P. Gould, 1968. "Adjustment Costs in the Theory of Investment of the Firm," Review of Economic Studies, Oxford University Press, vol. 35(1), pages 47-55.
- James Tobin, 1956.
"Liquidity Preference as Behavior Towards Risk,"
Cowles Foundation Discussion Papers
14, Cowles Foundation for Research in Economics, Yale University.
- William Vickrey, 1939. "Averaging of Income for Income-Tax Purposes," Journal of Political Economy, University of Chicago Press, vol. 47, pages 379.
- Malkiel, Burton G, 1979. "The Capital Formation Problem in the United States," Journal of Finance, American Finance Association, vol. 34(2), pages 291-306, May.
- Robin Boadway & Neil Bruce & Jack Mintz, 1982. "Taxation, Inflation and the User Cost of Capital in Canada," Working Papers 506, Queen's University, Department of Economics.
- Cass, David & Stiglitz, Joseph E., 1970. "The structure of investor preferences and asset returns, and separability in portfolio allocation: A contribution to the pure theory of mutual funds," Journal of Economic Theory, Elsevier, vol. 2(2), pages 122-160, June.
- Darby, Michael R, 1975. "The Financial and Tax Effects of Monetary Policy on Interest Rates," Economic Inquiry, Western Economic Association International, vol. 13(2), pages 266-76, June.
- Modigliani, Franco, 1982. " Debt, Dividend Policy, Taxes, Inflation and Market Valuation," Journal of Finance, American Finance Association, vol. 37(2), pages 255-73, May.
- David F. Bradford, 1978. "Tax Neutrality and the Investment Tax Credit," NBER Working Papers 0269, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1026. 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: ()
If references are entirely missing, you can add them using this form.