Taxation and Corporate Financial Policy
66 Pages Posted: 1 Jun 2012 Last revised: 2 Dec 2022
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Taxation and Corporate Financial Policy
Taxation and Corporate Financial Policy
Date Written: April 2001
Abstract
This paper reviews the theory and evidence regarding the impact of taxation on corporate financial policy. Starting from a basic characterization of the classical corporate income tax and its effects, the analysis focuses on three areas of research: equity policy, debt-equity decisions, and choices regarding ownership structure and organizational form. The discussion stresses the distinction between nominal and more fundamental financial differences for example, in the relationship between borrowing and leasing and that financial policy involves choices not only among different underlying policies but also among characterizations of a given policy. The final section offers some brief reflections on the implications of continuing financial innovation.
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