Irreversible investment and endogenous financing: An evaluation of the corporate tax effects

• 成果类型: Article
• 署名作者: Faig, M; Shum, P
• 署名单位: York University - Canada; University of Toronto
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/S0304-3932(98)00047-6
• 发表日期: 1999
• 页码: 143-171
• 关键词: asymmetric taxation; Corporate finance; irreversible investment

摘要

We evaluate the effects of corporate taxation on firms' investment and financing choices. We focus on how the asymmetry of the corporate tax, imperfect loss carry-overs, endogenous financing with credit constraints, and different degrees of investment irreversibility affect both incremental investment and entry decisions. We fmd that, as long as capital can be financed with debt at the margin, the tax distortions on the marginal investment decision are small. This is particularly so if the technology is flexible. In contrast, the tax distortions on the entry decision are substantial. The ability of firms to carry over their losses and choose their financial structure endogenously are important for reducing both types of distortions. (C) 1999 Elsevier Science B.V. All rights reserved. JEL classification: E2; G3; H2.