Tax accounting principles and corporate risk-taking

Johannes Becker and Melanie Steinhoff

Economics Letters, 2014, vol. 125, issue 1, 79-81

Abstract: We analyze the role of business taxation for corporate risk-taking under different accounting principles (such as mark-to-market, lower-of-cost-or-market and historical cost). We demonstrate that conservative accounting may imply incentives to overinvest in risky assets. However, with imperfect loss offsets, the mark-to-market principle penalizes risky investment whereas more conservative accounting leaves the risk choice unaffected.

Keywords: Accounting principles; Risk-taking; Business taxation; Corporate investment (search for similar items in EconPapers)
JEL-codes: H25 M41 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:125:y:2014:i:1:p:79-81

DOI: 10.1016/j.econlet.2014.08.013

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