A Contingent Claims Analysis of Partial Loss Offset Taxation and Risk-Taking

Jacques A Schanbel and Ebrahim Roumi

Public Finance = Finances publiques, 1990, vol. 45, issue 2, 304-20

Abstract: This article models the government's tax claim on the firm in a tax regime where gains and losses are not treated symmetrically as a portfolio of options. Employing option pricing theory to value these options, the impact of changes in firm risk on the market values of the firm's debt and equity is examined. Given the objective of equity value maximization, the firm's risk-taking propensity is gauged under alternative financial and tax scenarios.

Date: 1990
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:pfi:pubfin:v:45:y:1990:i:2:p:304-20

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