Do Taxes Affect Corporate Decisions? A Review

John R. Graham

Chapter Chapter 3 in Handbook of the Economics of Finance, 2013, vol. 2, pp 123-210 from Elsevier

Abstract: This chapter reviews tax research related to whether corporate and personal taxes affect domestic and multinational capital structure, debt maturity, payout policy, compensation policy, risk management, earnings management, leasing, pensions, R&D partnerships, tax shelters, transfer pricing, repatriation of foreign profits, and organizational form. For each topic, theory related to how taxes can affect corporate decision making and firm value is reviewed, followed by a summary of the related empirical evidence and a discussion of unresolved issues. Tax research generally supports the hypothesis that high-tax rate firms make policy choices in response to tax incentives. Many issues remain unresolved, however, including understanding whether tax effects are of first-order importance, why firms do not pursue tax benefits more aggressively, and measuring the effect of investor-level taxes on corporate actions.

Keywords: Taxes; Corporate taxation; Capital structure; Corporate finance; Compensation; Dividends; Payout policy (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finchp:2-a-123-210

DOI: 10.1016/B978-0-44-453594-8.00003-3

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