Taxation and Corporate Risk-Taking

Dominika Langenmayr and Rebecca Lester

No 6566, CESifo Working Paper Series from CESifo

Abstract: We study whether the corporate tax system provides incentives for risky firm investment. We analytically and empirically show two main findings: first, risk-taking is positively related to the length of tax loss periods because the loss rules shift some risk to the government; and second, the tax rate has a positive effect on risk-taking for firms that expect to use losses, and a weak negative effect for those that cannot. Thus, the sign of the tax effect on risky investment hinges on firm-specific expectations of future loss recovery.

Keywords: corporate taxation; risk-taking; net operating losses (search for similar items in EconPapers)
JEL-codes: G32 H25 H32 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-law, nep-pbe, nep-pub and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Taxation and Corporate Risk-Taking (2016)
Working Paper: Taxation and Corporate Risk-Taking (2014)
Working Paper: Taxation and corporate risk-taking (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_6566

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