Title: Investment, Financing Decisions, and Tax Policy
Abstract: mists have analyzed the effects of taxes on capital spending. Most studies assume that firms respond to prices set in centralized securities markets, such as market interest rates of Tobin's q, and firms undertake all profitable investment projects. Firms choose the mix or finance among internal funds, debt, and new equity independently; the availability of finance does not limit investment. The implications for tax policy are clear: the marginal tax rate on returns from a new project matters for investment, not the firm's average tax burden on returns from its investments in place. For firms that face imperfect markets for
Publication Year: 1989
Publication Date: 1989-05-01
Language: en
Type: article
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Cited By Count: 177
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