We quantify the tax savings from hedging by modeling major provisions of the tax code. Using data from COMPUSTAT, we simulate likely tax savings from reducing the volatility of taxable income. The average tax savings from a 5 percent volatility reduction is $142,360 or about 3 percent of taxable...

Do taxes affect corporate debt policy? This paper answers this question by testing whether the incremental use of debt is positively related to firm-specific, tax-code-consistent marginal tax rates. Using annual data for almost 10,000 firms for the years 1980-1992, evidence is provided which...

This paper focuses on how to best measure the corporate marginal tax rate, which is an important input into analysis of the cost of capital, financing policy, corporate hedging, corporate reorganizations, and the relative pricing between taxable and tax-advantaged securities. The results...

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...

This paper focuses on how best to measure the corporate marginal tax rate, which is an important input into financial analysis of the cost of capital, financing policy, corporate hedging, and corporate reorganizations. The results indicate that the simulated tax rate used by Shevlin (1990) and...

Does corporate culture matter? Can differences in corporate culture explain why similar firms diverge with one succeeding and the other failing? To answer these questions, we use a novel survey and interview-based analysis of 1,348 North American firms. Over half of senior executives believe...

Ninety-two percent of the 1,348 North American executives we survey believe that improving culture would increase firm value. A striking 84% believe they need to improve their culture. But how can that be achieved? Our paper provides some guidance. First, we directly link culture to financial...

An employee's annual earnings fall by 10% the year her firm files for bankruptcy and fall by a present value of 67% over seven years. This effect is more pronounced in thin labor markets and among small firms that are ultimately liquidated. Compensating wage differentials for this “bankruptcy...

Using a unique 10-year panel that includes more than 13,300 expected stock market return probability distributions, we find that executives are severely miscalibrated, producing distributions that are too narrow: realized market returns are within the executives' 80% confidence intervals only...

We conduct in-depth interviews of senior executives representing over 20% of the market capitalization of the U.S. equity market to understand: (i) the importance, antecedents and consequences of corporate culture; (ii) the mechanisms that underlie the creation and effectiveness of corporate...