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Date
2013-12Type
- Working Paper
ETH Bibliography
yes
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Abstract
Using an agency model of firm behavior, the paper analyzes whether the cost of investment should be tax exempt. The findings suggest that, when managers engage in wasteful capital expenditures, welfare may decline if the cost of investment is tax deductible, as commonly advocated. The extent to which the return on investment should be taxed depends on how the internal provision of incentive pay and external monitoring by banks interact in constraining the manager and whether retained earnings or new share issues finance investments at the margin. The results are informative for the design of investment subsidies which might be integrated in corporate tax systems such as an Allowance for Corporate Equity or a cash-flow tax. Show more
Publication status
publishedExternal links
Journal / series
CESifo Working PapersPages / Article No.
Publisher
CESifoSubject
Corporate taxation; Investment subsidies; Corporate governance; Delegated monitoring; Incentive contractOrganisational unit
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute
03988 - Köthenbürger, Marko / Köthenbürger, Marko
Related publications and datasets
Is previous version of: http://hdl.handle.net/20.500.11850/82765
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ETH Bibliography
yes
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