IDEAS home Printed from https://ideas.repec.org/p/zbw/arqudp/191.html
   My bibliography  Save this paper

Marginal tax rates under asymmetric taxation

Author

Listed:
  • Kruschwitz, Lutz
  • Löffler, Andreas

Abstract

This paper attempts to analytically determine the impact a tax shield (marginal tax rate) has on the value of a levered firm assuming that gains and losses are taxed differently. Previous research has done this by employing empirical methods and simulation studies. We are able to present closed-form solutions for two popular financing policies. Our solutions reveal that the marginal tax rate is a function with an order greater than one.

Suggested Citation

  • Kruschwitz, Lutz & Löffler, Andreas, 2015. "Marginal tax rates under asymmetric taxation," arqus Discussion Papers in Quantitative Tax Research 191, arqus - Arbeitskreis Quantitative Steuerlehre.
    • Handle: RePEc:zbw:arqudp:191
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/114496/1/83320758X.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Graham, John R. & Kim, Hyunseob, 2009. "The Effects of the Length of the Tax-Loss Carryback Period on Tax Receipts and Corporate Marginal Tax Rates," National Tax Journal, National Tax Association;National Tax Journal, vol. 62(3), pages 413-427, September.
    2. Graham, John R. & Mills, Lillian F., 2008. "Using tax return data to simulate corporate marginal tax rates," Journal of Accounting and Economics, Elsevier, vol. 46(2-3), pages 366-388, December.
    3. Miles, James A. & Ezzell, John R., 1980. "The Weighted Average Cost of Capital, Perfect Capital Markets, and Project Life: A Clarification," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(3), pages 719-730, September.
    4. Blouin, Jennifer & Core, John E. & Guay, Wayne, 2010. "Have the tax benefits of debt been overestimated?," Journal of Financial Economics, Elsevier, vol. 98(2), pages 195-213, November.
    Full references (including those not matched with items on IDEAS)

    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. Lutz Kruschwitz & Andreas Löffler, 2018. "Valuing the Tax Shield under Asymmetric Taxation," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 70(1), pages 3-17, February.
    2. Feld, Lars P. & Heckemeyer, Jost H. & Overesch, Michael, 2013. "Capital structure choice and company taxation: A meta-study," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 2850-2866.
    3. José A. Clemente-Almendros & Francisco Sogorb-Mira, 2016. "The effect of taxes on the debt policy of spanish listed companies," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 7(3), pages 359-391, August.
    4. Giacomo Brusco & Benjamin Glass, 2023. "Risky business: policy uncertainty and investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(5), pages 1331-1345, October.
    5. Colonnello, Stefano & Curatola, Giuliano & Hoang, Ngoc Giang, 2017. "Direct and indirect risk-taking incentives of inside debt," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 428-466.
    6. Xikai Chen & Meiting Lu & Yaowen Shan, 2021. "Changes in marginal tax rates over the past three decades in the United States," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 2601-2624, April.
    7. Paul Borochin & Jie Yang, 2016. "Options, Equity Risks, and the Value of Capital Structure Adjustments," Finance and Economics Discussion Series 2016-097, Board of Governors of the Federal Reserve System (U.S.).
    8. Eric Zwick, 2018. "The Costs of Corporate Tax Complexity," NBER Working Papers 24382, National Bureau of Economic Research, Inc.
    9. Faulkender, Michael & Smith, Jason M., 2016. "Taxes and leverage at multinational corporations," Journal of Financial Economics, Elsevier, vol. 122(1), pages 1-20.
    10. Lina Cui, 2013. "A Markov Chain Analysis on the Impact of German Tax Loss Offset Restrictions," Economic Papers, The Economic Society of Australia, vol. 32(1), pages 122-134, March.
    11. Barış Kaymak & Immo Schott, 2023. "Tax Heterogeneity and Misallocation," Working Papers 23-33, Federal Reserve Bank of Cleveland.
    12. Thomas Dangl & Josef Zechner, 2021. "Debt Maturity and the Dynamics of Leverage [Rollover risk and market freezes]," The Review of Financial Studies, Society for Financial Studies, vol. 34(12), pages 5796-5840.
    13. Borochin, Paul & Yang, Jie, 2017. "Options, equity risks, and the value of capital structure adjustments," Journal of Corporate Finance, Elsevier, vol. 42(C), pages 150-178.
    14. Annabi, Amira & Breton, Michèle & François, Pascal, 2012. "Resolution of financial distress under Chapter 11," Journal of Economic Dynamics and Control, Elsevier, vol. 36(12), pages 1867-1887.
    15. Denise A. Jones, 2013. "Changes in the Funded Status of Retirement Plans after the Adoption of SFAS No. 158: Economic Improvement or Balance Sheet Management," Contemporary Accounting Research, John Wiley & Sons, vol. 30(3), pages 1099-1132, September.
    16. Katrien Kestens & Philippe Van Cauwenberge & Johan Christiaens, 2012. "The Effect of the Notional Interest Deduction on the Capital Structure of Belgian SMEs," Environment and Planning C, , vol. 30(2), pages 228-247, April.
    17. Ralf Diedrich & Stefan Dierkes & Hans-Christian Gröger, 2022. "A note on the cost of capital with fixed payout ratios," Review of Quantitative Finance and Accounting, Springer, vol. 59(4), pages 1559-1575, November.
    18. Fischer, Max & Krause, Marko & Lahmann, Alexander & Stimper, Franziska, 2022. "Firm valuation with state dependent COD taxation," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 550-561.
    19. Jeffrey L. Coles & Elena Patel & Nathan Seegert & Matthew Smith, 2022. "How Do Firms Respond to Corporate Taxes?," Journal of Accounting Research, Wiley Blackwell, vol. 60(3), pages 965-1006, June.
    20. Marko Volker Krause, 2019. "De and re-levering betas with risky debt," Business Research, Springer;German Academic Association for Business Research, vol. 12(2), pages 703-720, December.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:zbw:arqudp:191. 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: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: http://www.arqus.info/ .

    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.