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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/38888
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| Title: | | Optimal Investment and Financial Strategies under Tax Rate Uncertainty  |
| Authors: | | Fedele, Alessandro Panteghini, Paolo M. Vergalli, Sergio |
| Issue Date: | | 2010 |
| Series/Report no.: | | CESifo working paper Public Finance 3017 |
| Abstract: | | In this paper we apply a real-option model to study the effects of tax rate uncertainty on a firm's decisions. In doing so, we depart from the relevant literature, which focuses on fully equity-financed investment project. By letting a representative firm borrow optimally, we show that debt finance not only encourages investment activities but can also substantially mitigate the effect of tax rate uncertainty on investment timing. |
| Subjects: | | capital levy corporate taxation default risk real options |
| JEL: | | H25 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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