This paper provides a model-based analysis of special tax rules for corporations that invest in stocks of other corporations. To avoid double taxation the returns from such stock investments (dividends and capital gains) are usually tax-exempted or taxed at a reduced tax rate. This allows for...

The purpose of this paper is to investigate the interest tax deductibility effect on cost of capital under earning stripping rules recalling Modigliani-Miller's theorem (1958, 1963). In fact, Italy's corporate taxation, as other countries, does not allow to fully deduct interest expenses of debt...

This paper presents a comprehensive overview of existing methods of mitigating double taxation of corporate income within a standard cost of capital model. Two of the most well-known and most utilized methods, the imputation and the split rate systems, do not mitigate double taxation in...

When calculating Tax Savings, TS we are confronted with a strange mix of accounting accrual and market value when involving TS in the calculation of the Weighted Average Cost of Capital, WACC or the Cost of Equity, Ke. Firms earn the right to TS once they accrue the interest expense and they...

We analyze how interactions between corporate taxation and corporate governance affect shareholder capital. Using a model with strategic interaction between managers and outside shareholders, we hypothesize that, while an increase in the corporate tax rate decreases shareholder capital, an...

Firms are heterogeneous in size, productivity, ownership concentration, governance, financial structure and other dimensions. This paper introduces a stylized theoretical framework to account for such differences and to explain the heterogeneous tax sensitivity of firm-level investments across...

In 2008, Germany introduced an interest barrier which allows the deduction of interest only if a company's net interest expenditure does not exceed 30% of the company's EBITDA. The regulation aims at preventing excessive debt financing of companies resident in Germany and distinguishes neither...

I apply a new single-pass CAPM methodology for assessing systematic risk to all ASX stocks which indicates that securities which pay franking credits in Australia appear to face far less systematic risk than do stocks that never pay franking credits. But in this context, this apparent reduction...