Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/253647 
Year of Publication: 
2022
Series/Report no.: 
arqus Discussion Paper No. 269
Publisher: 
Arbeitskreis Quantitative Steuerlehre (arqus), Berlin
Abstract: 
We analyze to what extent more generous tax loss offset regulations are associated with a weaker decline and stronger recovery of firm stock prices during economic crises. We argue that an unrestricted loss carryforward and, particularly, an unrestricted loss carryback provides firms with additional liquidity, which should lower the risk of bankruptcy and can be used for investment purposes. Our empirical findings document that (1) an unrestricted loss carryforward and an unrestricted loss carryback result in a weaker decline and more timely recovery of stock prices during the considered crises, (2) this effect is stronger in high-tax countries, and (3) this effect is also dependent upon pre-crisis profitability.
Subjects: 
tax loss offset
economic crisis
firm performance
JEL: 
H25
G01
Document Type: 
Working Paper

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