Taxation and Corporate Risk-Taking

Dominika Langenmayr, Rebecca Lester

Publication: Scientific journalJournal articlepeer-review

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.
Original languageEnglish
Pages (from-to)237 - 266
JournalAccounting Review
Volume93
DOIs
Publication statusPublished - 2017

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