• Media type: E-Book
  • Title: Sharing Risk with the Government : How Taxes Affect Corporate Risk Taking
  • Contributor: Ljungqvist, Alexander [Author]; Zhang, Liandong [Other]; Zuo, Luo [Other]
  • Published: [S.l.]: SSRN, [2016]
  • Published in: NBER Working Paper ; No. w21834
  • Extent: 1 Online-Ressource (72 p)
  • Language: English
  • Origination:
  • Footnote: Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 2015 erstellt
  • Description: Using 113 staggered changes in corporate income tax rates across U.S. states, we provide evidence on how taxes affect corporate risk-taking decisions. Higher taxes reduce expected profits more for risky projects than for safe ones, as the government shares in a firm's upside but not in its downside. Consistent with this prediction, we find that risk taking is sensitive to taxes, albeit asymmetrically: the average firm reduces risk in response to a tax increase (primarily by changing its operating cycle and reducing R&D risk) but does not respond to a tax cut. We trace the asymmetry back to constraints on risk taking imposed by creditors. Finally, tax loss-offset rules moderate firms' sensitivity to taxes by allowing firms to partly share downside risk with the government
  • Access State: Open Access