Economics at your fingertips  

On the value and determinants of the interest tax shields

Amilcar A. Menichini ()
Additional contact information
Amilcar A. Menichini: Naval Postgraduate School

Review of Quantitative Finance and Accounting, 2017, vol. 48, issue 3, 725-748

Abstract: Abstract We use a dynamic model of the firm to ascertain both the value and the determinants of the debt tax shields. For a representative U.S. firm, we find that the value of the interest tax shields represents less than 5 % of firm value, and it varies considerably across U.S. industries. Our results also show that this component of firm value behaves counter-cyclically over the business cycle. Finally, besides the interest rate on debt and the corporate income tax rate, we find that the curvature of the production function is one of the main determinants of the tax advantage of debt.

Keywords: Interest tax shields; Dividend discount model; Gordon growth model; Dynamic programming (search for similar items in EconPapers)
JEL-codes: G31 G32 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to full text is restricted to subscribers.

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:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee

More articles in Review of Quantitative Finance and Accounting from Springer
Series data maintained by Sonal Shukla ().

Page updated 2018-02-15
Handle: RePEc:kap:rqfnac:v:48:y:2017:i:3:d:10.1007_s11156-016-0566-0