We analyze several hundred firms that expand via acquisition and/or increase their reported number of business segments. The average combined market reaction to acquisition announcements is positive but, according to the Berger and Ofek (1995) method for valuing conglomerates, the excess values...

We provide evidence that corporate tax status is endogenous to the financing decision, which induces a spurious relation between measures of financial policy and many commonly used tax proxies. Specifically, both interest expense and lease payments are tax deductible. Thus, a firm that finances...

We analyze several hundred firms that expand via acquisition and/or increase their reported number of business segments. The average combined market reaction to acquisition announcements is positive but, according to the Berger and Ofek (1995) method for valuing conglomerates, the excess values...

We provide evidence that corporate tax status is endogenous to the financing decision, which induces a spurious relation between measures of financial policy and many commonly used tax variables. Specifically, both interest expense and lease payments are tax deductible. Thus, a firm that...

Taxes play an important but underemphasized role in the valuation of a company and its projects. For example, the authors estimate that the expected tax benefits from interest deductions by all publicly traded U.S. corporations were responsible for almost $1.4 trillion of their total market...