Abstract

http://ssrn.com/abstract=1871
 
 

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Taxes, Financing Decisions, and Firm Value


Eugene F. Fama


University of Chicago - Finance

Kenneth R. French


Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

May 1997

Center for Research in Security Prices (CRSP) Working Paper No.

Abstract:     
We use cross-section regressions to study how a firm's value is related to dividends and debt. With a good control for profitability, the regressions can measure how the taxation of dividends and debt affects firm value. Simple tax hypotheses say that value is negatively related to dividends and positively related to debt. We find the opposite. We infer that dividends and debt convey information about profitability (expected net cash flows) missed by a wide range of control variables. This information about profitability obscures any tax effects of financing decisions.

Number of Pages in PDF File: 34

JEL Classification: G12, G14, G32

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Date posted: February 1, 1997  

Suggested Citation

Fama, Eugene F. and French, Kenneth R., Taxes, Financing Decisions, and Firm Value (May 1997). Center for Research in Security Prices (CRSP) Working Paper No.. Available at SSRN: http://ssrn.com/abstract=1871 or http://dx.doi.org/10.2139/ssrn.1871

Contact Information

Eugene F. Fama (Contact Author)
University of Chicago - Finance ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7282 (Phone)
773-702-9937 (Fax)
Kenneth R. French
Dartmouth College - Tuck School of Business ( email )
Hanover, NH 03755
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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References:  45
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