Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/43566
Authors: 
Fedele, Alessandro
Panteghini, Paolo M.
Vergalli, Sergio
Year of Publication: 
2010
Series/Report no.: 
Nota di lavoro // Fondazione Eni Enrico Mattei: Institutions and markets 2010,68
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 projects. 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: 
H2
Document Type: 
Working Paper

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