Leverage, uncertainty and investment decisions

Turalay Kenc and Ciaran Driver

Economics Letters, 2020, vol. 190, issue C

Abstract: We explore the role of taxes on stimulating investment decisions for levered firms under cash flows and investment costs uncertainty using the adjusted present value-based real options approach developed by Myers and Read (2019). We extend their work to consider combined tax credits and uncertain investment costs. We then run a numerical analysis to quantify the impact of uncertainty, corporate tax and investment tax credit in stimulating investments.

Keywords: Irreversible investment; Tax incentives; Uncertainty; Leverage (search for similar items in EconPapers)
JEL-codes: G31 G32 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:190:y:2020:i:c:s0165176520300628

DOI: 10.1016/j.econlet.2020.109052

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