IDEAS home Printed from https://ideas.repec.org/a/spr/epolit/v35y2018i3d10.1007_s40888-018-0116-4.html
   My bibliography  Save this article

The impact of ACE on investment: the Italian case

Author

Listed:
  • Alessandro Zeli

    (ISTAT, Italian Institute of Statistics)

Abstract

An ACE tax relief was introduced in Italy in 2011; this paper is focused on its impact on firms’ investment expenses. So far studies on ACE are mainly focused on the impact of ACE on corporate finance and balancing the fiscal bias towards the debt financing. However it is important to analyze the impact of ACE also on firms’ performance indicators such as investments. We utilize a balanced panel spanning from 2007 to 2013 to estimate a DiD model. Our findings confirm a positive impact of ACE on investment and the effect on cash flow is larger for small firms than for large firms.

Suggested Citation

  • Alessandro Zeli, 2018. "The impact of ACE on investment: the Italian case," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(3), pages 741-762, December.
    • Handle: RePEc:spr:epolit:v:35:y:2018:i:3:d:10.1007_s40888-018-0116-4
    DOI: 10.1007/s40888-018-0116-4
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40888-018-0116-4
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s40888-018-0116-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hebous, Shafik & Ruf, Martin, 2017. "Evaluating the effects of ACE systems on multinational debt financing and investment," Journal of Public Economics, Elsevier, vol. 156(C), pages 131-149.
    2. Leonardo Gambacorta & Giacomo Ricotti & Suresh Sundaresan & Zhenyu Wang, 2017. "The effects of tax on bank liability structure," BIS Working Papers 611, Bank for International Settlements.
    3. Hildegunn Ekroll Stokke, 2015. "Regional payroll tax cuts and individual wages: Heterogeneous effects across education groups," Working Paper Series 16815, Department of Economics, Norwegian University of Science and Technology.
    4. Lamont, Owen, 1997. "Cash Flow and Investment: Evidence from Internal Capital Markets," Journal of Finance, American Finance Association, vol. 52(1), pages 83-109, March.
    5. Jason G. Cummins & Kevin A. Hassett & R. Glenn Hubbard, 1995. "Have Tax Reforms Affected Investment?," NBER Chapters, in: Tax Policy and the Economy, Volume 9, pages 131-150, National Bureau of Economic Research, Inc.
    6. Brekke, Kurt R. & Garcia Pires, Armando J. & Schindler, Dirk & Schjelderup, Guttorm, 2017. "Capital taxation and imperfect competition: ACE vs. CBIT," Journal of Public Economics, Elsevier, vol. 147(C), pages 1-15.
    7. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    8. Fazzari, Steven M & Hubbard, R Glenn & Petersen, Bruce C, 1988. "Investment, Financing Decisions, and Tax Policy," American Economic Review, American Economic Association, vol. 78(2), pages 200-205, May.
    9. Ruud Mooij & Michael Devereux, 2011. "An applied analysis of ACE and CBIT reforms in the EU," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(1), pages 93-120, February.
    10. David H. Autor, 2003. "Outsourcing at Will: The Contribution of Unjust Dismissal Doctrine to the Growth of Employment Outsourcing," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 1-42, January.
    11. Cummins, Jason G. & Hassett, Kevin A. & Hubbard, R. Glenn, 1996. "Tax reforms and investment: A cross-country comparison," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 237-273, October.
    12. Ernesto Zangari, 2014. "Addressing the Debt Bias: A Comparison between the Belgian and the Italian ACE Systems," Taxation Papers 44, Directorate General Taxation and Customs Union, European Commission.
    13. Richard Blundell & Monica Costa Dias, 2000. "Evaluation methods for non-experimental data," Fiscal Studies, Institute for Fiscal Studies, vol. 21(4), pages 427-468, January.
    14. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    15. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March.
    16. aus dem Moore, Nils, 2014. "Corporate Taxation and Investment: Evidence from the Belgian ACE Reform," Ruhr Economic Papers 534, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    17. Vella, Francis & Verbeek, Marno, 1999. "Two-step estimation of panel data models with censored endogenous variables and selection bias," Journal of Econometrics, Elsevier, vol. 90(2), pages 239-263, June.
    18. Kevin A. Hassett, 1999. "Tax Policy and Investment," Books, American Enterprise Institute, number 53049, September.
    19. Laura Vartia, 2008. "How do Taxes Affect Investment and Productivity?: An Industry-Level Analysis of OECD Countries," OECD Economics Department Working Papers 656, OECD Publishing.
    20. Paolo Panteghini & Maria Laura Parisi & Francesca Pighetti, 2012. "Italy's ACE Tax and its Effect on a Firm's Leverage," CESifo Working Paper Series 3869, CESifo.
    21. Whited, Toni M, 1992. "Debt, Liquidity Constraints, and Corporate Investment: Evidence from Panel Data," Journal of Finance, American Finance Association, vol. 47(4), pages 1425-1460, September.
    22. Simona Balzano & Filippo Oropallo & Valentino Parisi, 2011. "On the Italian ACE and its impact on enterprise performance: a PLS-path modeling analysis," International Journal of Microsimulation, International Microsimulation Association, vol. 4(2), pages 14-26.
    23. Doina Radulescu & Michael Stimmelmayr, 2006. "ACE Vs. CBIT: Which Is Better for Investment and Welfare?," EcoMod2006 272100072, EcoMod.
    24. Stephen C. Vogt, 1994. "The Cash Flow/investment Relationship: Evidence from U.S. Manufacturing Firms," Financial Management, Financial Management Association, vol. 23(2), Summer.
    25. Bandick, Roger & Karpaty, Patrik, 2011. "Employment effects of foreign acquisition," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 211-224, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. M. Bini & L. Nascia & A. Zeli, 2023. "Foreign ownership of enterprises and employment: the pre-crisis period in Italy," SN Business & Economics, Springer, vol. 3(1), pages 1-20, January.
    2. Lucio Masserini & Matilde Bini & Alessandro Zeli, 2021. "A Longitudinal Analysis of Riskiness Indicators After the 2008 and 2011 Economic Crises: The Case of Italian Manufacturing," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 156(2), pages 499-513, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Driffield, Nigel & Pal, Sarmistha, 2006. "Do external funds yield lower returns?: Recent evidence from East Asian economies," Journal of Asian Economics, Elsevier, vol. 17(1), pages 171-188, February.
    2. repec:spo:wpmain:info:hdl:2441/4v8c8tnfgu8g392dpm6uaefuus is not listed on IDEAS
    3. Bofinger, Peter & Schnabel, Isabel & Feld, Lars P. & Schmidt, Christoph M. & Wieland, Volker, 2015. "Zukunftsfähigkeit in den Mittelpunkt. Jahresgutachten 2015/16 [Focus on Future Viability. Annual Report 2015/16]," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201516.
    4. Wang, Xun, 2022. "Financial liberalization and the investment-cash flow sensitivity," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 77(C).
    5. Coad, Alex, 2010. "Neoclassical vs evolutionary theories of financial constraints: Critique and prospectus," Structural Change and Economic Dynamics, Elsevier, vol. 21(3), pages 206-218, August.
    6. Mooij Ruud De & Hebous Shafik & Hrdinkova Milena, 2018. "Growth-Enhancing Corporate Tax Reform in Belgium," Nordic Tax Journal, Sciendo, vol. 2018(1), pages 1-17, January.
    7. repec:hal:spmain:info:hdl:2441/4v8c8tnfgu8g392dpm6uaefuus is not listed on IDEAS
    8. Xin Qu & Majella Percy & Fang Hu & Jenny Stewart, 2022. "Can CEO equity‐based compensation limit investment‐related agency problems?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(2), pages 2579-2614, June.
    9. Poncet, Sandra & Steingress, Walter & Vandenbussche, Hylke, 2010. "Financial constraints in China: Firm-level evidence," China Economic Review, Elsevier, vol. 21(3), pages 411-422, September.
    10. Fabio Bertoni & María Ferrer & José Martí, 2013. "The different roles played by venture capital and private equity investors on the investment activity of their portfolio firms," Small Business Economics, Springer, vol. 40(3), pages 607-633, April.
    11. Lewe, Stefan, 2003. "Wachstumseffiziente Unternehmensbesteuerung," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 20042, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    12. Beck, Thorsten & Demirguc-Kunt, Asli & Laeven, Luc & Maksimovic, Vojislav, 2006. "The determinants of financing obstacles," Journal of International Money and Finance, Elsevier, vol. 25(6), pages 932-952, October.
    13. MORIKAWA Masayuki, 2012. "Financial Constraints in Intangible Investments: Evidence from Japanese firms," Discussion papers 12045, Research Institute of Economy, Trade and Industry (RIETI).
    14. Petutschnig, Matthias & Rünger, Silke, 2017. "The effects of a tax allowance for growth and investment: Empirical evidence from a firm-level analysis," arqus Discussion Papers in Quantitative Tax Research 221, arqus - Arbeitskreis Quantitative Steuerlehre.
    15. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March.
    16. Zeynep Kabukcuoglu, 2019. "The cyclical behavior of R&D investment during the Great Recession," Empirical Economics, Springer, vol. 56(1), pages 301-323, January.
    17. Winter, Joachim, 1998. "Does Firms` Financial Status Affect Plant-Level Investment and Exit Decision," Sonderforschungsbereich 504 Publications 98-48, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    18. Addessi, William & Saltari, Enrico, 2011. "The effect of debt tax benefits on firm investment decisions," MPRA Paper 35436, University Library of Munich, Germany.
    19. Srinivasan, Anand & Thampy, Ashok, 2017. "The effect of relationships with government-owned banks on cash flow constraints: Evidence from India," Journal of Corporate Finance, Elsevier, vol. 46(C), pages 361-373.
    20. Stijn Claessens & M Ayhan Kose, 2018. "Frontiers of macrofinancial linkages," BIS Papers, Bank for International Settlements, number 95.
    21. Kayis-Kumar, Ann, 2015. "Thin capitalisation rules: A second-best solution to the cross-border debt bias?," MPRA Paper 72031, University Library of Munich, Germany.
    22. Kadapakkam, Palani-Rajan & Kumar, P. C. & Riddick, Leigh A., 1998. "The impact of cash flows and firm size on investment: The international evidence," Journal of Banking & Finance, Elsevier, vol. 22(3), pages 293-320, March.

    More about this item

    Keywords

    ACE; Investment incentives; Panel data; DiD model;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:epolit:v:35:y:2018:i:3:d:10.1007_s40888-018-0116-4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.