Using a firm-level panel data set I assess whether dynamic models of investment provide an empirically fruitful framework for analyzing tax effects on changes in capital stock. In particular I estimate a one-step error correction model (ECM) complementing the usual estimation of a distributed...

This paper develops and tests the hypothesis that accounting rules mitigate the effect of tax policy on firm investment decisions by obscuring the timing of tax payments. I model a firm that maximizes a discounted weighted average of after-tax cash flows and accounting profits. I estimate the...

This study uses a switching regression framework with known sample separation to analyze the effects of corporate income taxation on investment in case of binding and non-binding financial constraints. By employing two different sample splitting criteria, payout behavior and the ratio of...

Extensive empirical research concerning the impact of taxes on corporate decisions has had trouble identifying seemingly obvious effects. Perhaps the problem is that the seemingly obvious tax predictions are not quite right. We provide an equilibrium model with both corporate and personal taxes....

Recent theoretical approaches have linked shifts in firms' internal funds and investment spending, holding constant underlying investment opportunities. An important impediment to convincing tests of these models is the lack of firm-level data on the relative costs of internal and external...

This paper studies the effect of corporate taxes on investment. Using firm-level data on German corporations, we investigate the 2008 tax reform that cut corporate taxes by 10 percentage points. We expect heterogeneous investment responses across firms, since firms with a foreign parent have...