Abstract:
This paper reviews tax research related to domestic and multinational capital structure, payout policy, compensation policy, risk management, and organizational form. For each topic, the theoretical arguments explaining how taxes can affect corporate decision-making and firm value are reviewed, followed by a summary of the related empirical evidence and a discussion of unresolved issues. Tax research generally supports the hypothesis that high-tax rate firms pursue policies that provide tax benefits. Many issues remain unresolved, however, including understanding whether tax effects are of first-order importance, why firms do not pursue tax benefits more aggressively, and whether corporate actions are affected by investor-level taxes.
Keywords: Capital Structure, Corporate Finance, Compensation, Dividends, Payout Policy, Taxes
JEL Classifications: G30, G32, G34, G35, H25
Accepted Paper Series
Date posted: March 03, 2003
; Last revised: June 26, 2003
Suggested Citation
Graham, John R., Taxes and Corporate Finance: A Review (May 29, 2003). Review of Financial Studies, Forthcoming. Available at SSRN: http://ssrn.com/abstract=358580 or doi:10.2139/ssrn.358580
Contact Information
John Robert Graham (Contact Author)
Duke University - Fuqua School of Business ( email )
Box 90120 Durham, NC 27708-0120 United States 919-660-7857 (Phone) 919-660-8030 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue Cambridge, MA 02138 United States
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