Effects of Tax Rate Changes on the Cost of Capital: The Case of Japanese Firms

The paper studies the effects that tax rate changes have on the cost of capital when firms follow target leverage ratios. We show that changes in individual income tax rates are neutral. The focus therefore is on the effects of changes in marginal corporate tax rates. These effects are computed for Japanese firms. Special emphasis is given to changes in statutory tax rates and provisions that allow firms to carry their losses forward.

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Year of publication:	2007
Authors:	Kubota, Keiichi ; Takehara, Hitoshi
Published in:	FinanzArchiv: Public Finance Analysis. - ISSN 0015-2218. - Vol. 63.2007, 2, p. 163-185
Subject:	cost of capital \| effective marginal tax rates in Japan \| Miller equilibrium \| Graham's simulation method \| loss carry-forward

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Extent:	text/html
Type of publication:	Article
Classification:	H24 - Personal Income and Other Nonbusiness Taxes and Subsidies ; H25 - Business Taxes and Subsidies ; G31 - Capital Budgeting; Investment Policy
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005764470