Tax loss carryforwards and firms' risk

• 成果类型: Article
• 署名作者: Favilukis, Jack; Giammarino, Ron; Pizarro, Jose; Simutin, Mikhail
• 署名单位: University of British Columbia; University of Toronto
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2026.104356
• 发表日期: 2026-10
• 页码: 104356
• 关键词: Tax loss carryforwards; Equity return; RISK; cross-section; DELISTING BIAS; corporate; valuation; INVESTMENT; income

摘要

Tax loss carryforwards (TLCF) - accumulated losses that reduce taxable income - are an important and risky corporate asset. We show theoretically how TLCF affect equity risk: If TLCF are low and used with certainty, equity risk decreases in TLCF because TLCF represent a safe cash flow; if TLCF are high, equity risk increases in TLCF because TLCF increase after-tax cash flows in good times but may expire unused or be deferred in bad times. In a calibrated model the latter effect dominates and risk increases in TLCF on average. Empirically, TLCF positively forecast firms' volatility, beta, and return.