We investigate whether firms use pretax cash flow freed-up by tax avoidance to make real investments. We expect uncertainty about tax avoidance to affect how this cash is used, and predict that firms facing low (high) financial constraints will use more of this cash for real investments...

This paper compares two attributes of a deferred tax liability (DTL) that arise from differences in book and tax depreciation methods. The first attribute is the effect of the DTL on the market value of the firm. The second is the length of time between when the asset is placed into service and...