Taxation and the Cost of Capital: The "Old" View, the "New" View and Another View

Hans-Werner Sinn

No 3501, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper is a critical survey of the recent literature on the tax effects on corporate finance and investment decisions. It corrects a common misinterpretation of the "new" view, emphasizes the cushion effect of financial optimization, dismisses the view that optimizing firms behave as if they maximized their cost of finance, studies the role of immature firms, questions the alleged support of the old view by the occurrence of share repurchases, comments on a potential US budget compromise, and suggests the idea of a Political Miller Equilibrium.

Date: 1990-10
Note: PE
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Published as Taxation and the Cost of Capital: The "Old" View, the "New" View, and Another View , Hans-Werner Sinn. in Tax Policy and the Economy, Volume 5 , Bradford. 1991

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Chapter: Taxation and the Cost of Capital: The "Old" View, the "New" View, and Another View (1991)
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