This paper derives analytical measures of the combined effects of tax changes and adjustment costs on investment and market value. Unlike earlier measures, the effective tax rate derived is valid in the presence of adjustment costs and anticipated tax changes. The derived measure of the impact...

The taxation of corporate assets is well understood to influence investment and firm valuation. This paper explores the consequences of postwar U.S. tax changes in a dynamic model which incorporates costs of adjustment and investor expectations of future tax reforms and macroeconomic...

Here, we extend our earlier analysis in two ways. First, we consider the impact of the 2004 Presidential election on option prices, to gain further insight into and confirmation of the mechanism through which the 2003 legislation affected firm values. Second, we explore in more detail the...