Tax Policy and Abnormal Investment Behavior

• 成果类型: Article
• 署名作者: Xu, Qiping; Zwick, Eric
• 署名单位: University of Illinois System; University of Illinois Urbana-Champaign; University of Chicago
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhae040
• 发表日期: 2024
• 页码: 2971
• 关键词: Incentives; taxation; constraints; elasticity; COSTS; MODEL

摘要

This paper studies tax-minimizing investment, whereby firms tilt capital purchases toward year-end to reduce taxes. We use this pattern to characterize how taxes affect investment behavior. We exploit variation in firm tax positions from administrative data to confirm that tax minimization causes spikes. Spikes increase when firms face financial constraints or higher option values of waiting. Cumulative investment does not completely reverse after spikes. We develop an investment model with tax asymmetries to rationalize these patterns. Both depreciation motives (later investments face lower effective tax rates) and option value motives (tax asymmetry implies time-varying opportunities to minimize taxes) are necessary to fit the data. (JEL G31, G38, H25)