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Tax accounting principles and corporate risk-taking

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  • Becker, Johannes
  • Steinhoff, Melanie

Abstract

We analyze the role of business taxation for corporate risk-taking under different accounting principles (such as mark-to-market, lower-of-cost-or-market and historical cost). We demonstrate that conservative accounting may imply incentives to overinvest in risky assets. However, with imperfect loss offsets, the mark-to-market principle penalizes risky investment whereas more conservative accounting leaves the risk choice unaffected.

Suggested Citation

  • Becker, Johannes & Steinhoff, Melanie, 2014. "Tax accounting principles and corporate risk-taking," Economics Letters, Elsevier, vol. 125(1), pages 79-81.
    • Handle: RePEc:eee:ecolet:v:125:y:2014:i:1:p:79-81
    DOI: 10.1016/j.econlet.2014.08.013
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    References listed on IDEAS

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    10. European Commission, 2001. "Annex to Company Taxation in the Internal Market," Taxation Studies 0006, Directorate General Taxation and Customs Union, European Commission.
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    Cited by:

    1. Rainer Niemann & Mariana Sailer, 2023. "Is analytical tax research alive and kicking? Insights from 2000 until 2022," Journal of Business Economics, Springer, vol. 93(6), pages 1149-1212, August.

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    More about this item

    Keywords

    Accounting principles; Risk-taking; Business taxation; Corporate investment;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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