Taxation and Corporate Risk-Taking

Arbeitspapier

We study whether the corporate tax system provides incentives for risky firm investment. We analytically and empirically show two main findings: first, risk-taking is positively related to the length of tax loss periods because the loss rules shift some risk to the government; and second, the tax rate has a positive effect on risk-taking for firms that expect to use losses, and a weak negative effect for those that cannot. Thus, the sign of the tax effect on risky investment hinges on firm-specific expectations of future loss recovery.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 6566

Classification and Topics

• Classification: Wirtschaft ; Business Taxes and Subsidies including sales and value-added (VAT) ; Fiscal Policies and Behavior of Economic Agents: Firm ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Subject: corporate taxation ; risk-taking ; net operating losses

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Langenmayr, Dominika ; Lester, Rebecca
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/167552
• Last update: 10.03.2025, 11:45 AM CET