Download this Paper Open PDF in Browser

Taxation and Corporate Risk-Taking

58 Pages Posted: 2 Jul 2014 Last revised: 26 Jul 2017

Dominika Langenmayr

Catholic University of Eichstaett-Ingolstadt; CESifo (Center for Economic Studies and Ifo Institute)

Rebecca Lester

Stanford Graduate School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2017


We study whether the corporate tax system provides incentives for risky firm investment. We analytically and empirically show two main findings: first, risk-taking is positively related to the length of tax loss periods because the loss rules shift some risk to the government; and second, the tax rate has a positive effect on risk-taking for firms that expect to use losses, and a weak negative effect for those that cannot. Thus, the sign of the tax effect on risky investment hinges on firm-specific expectations of future loss recovery.

Keywords: Corporate taxation, firm risk-taking, net operating losses

JEL Classification: H25, H32, G32

Suggested Citation

Langenmayr, Dominika and Lester, Rebecca, Taxation and Corporate Risk-Taking (June 1, 2017). The Accounting Review, Forthcoming. Available at SSRN: or

Dominika Irma Langenmayr

Catholic University of Eichstaett-Ingolstadt ( email )

Auf der Schanz 49
Ingolstadt, D-85049

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679

Rebecca Lester (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Paper statistics

Abstract Views