FINANCIAL DECISIONS AND TAX SHIELDS

Petr Marek and Jarmila Radova

Global Journal of Business Research, 2007, vol. 1, issue 2, 133-143

Abstract: This paper addresses two questions related to tax shields. Firstly, what is the real moment of tax shield realization? Secondly, what influence shall the real tax shield realization moment have on tax shield present value? The real moment of tax shield realization is defined at the moment when the tax shield is reflected in the taxpayer’s cash flow, in the form of income tax reconciliation and paid tax deposits. Subsequently, authors have investigated the dependence of tax shield present value on the discount rate, and on the size of a time span between the moment of tax-shield claim origination and tax-period’s end. The largest difference between basic value of the tax shield and its present value was found at the maximum discount rate considered in the model, and at the maximum size of the time span between the moment of tax-shield claim origination and tax-period’s end. The dependence was not always linear. In conclusion modifications of financial models that employ tax shields are suggested. These modifications are based on including coefficients reflecting the real moment of tax shield realization.

Date: 2007
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.theibfr2.com/RePEc/ibf/gjbres/gjbr-v1n2-2007/GJBR-V1N2-2007-12.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ibf:gjbres:v:1:y:2007:i:2:p:133-143

Access Statistics for this article

Global Journal of Business Research is currently edited by Terrance Jalbert

More articles in Global Journal of Business Research from The Institute for Business and Finance Research
Bibliographic data for series maintained by Mercedes Jalbert ( this e-mail address is bad, please contact ).