Accelerated Depreciation, Default Risk and Investment Decisions

Arbeitspapier

In this article we focus on a representative firm that can decide when to invest under default risk. On the one hand, this firm can benefit from generous tax depreciation allowances, on the other hand it faces a default risk. Our aim is to study the effects of tax depreciation allowances in a risky environment. As will be shown in our numerical analysis, generous tax depreciation allowances lead to a decrease in a firm’s leverage and, in most cases, cause a reduction in default risk. This result has a strong policy implication, in that it shows that an investment stimulus pack is expected neither to increase the default risk nor to cause financial instability.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Nota di Lavoro ; No. 14.2016

Classification and Topics

• Classification: Wirtschaft
• Subject: Capital Structure ; Contingent Claims ; Corporate Taxation and Hybrid Securities

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Panteghini, Paolo M. ; Vergalli, Sergio
• Event: Veröffentlichung
• (who): Fondazione Eni Enrico Mattei (FEEM)
• (where): Milano
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/142288
• Last update: 10.03.2025, 11:45 AM CET