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Title: Present bias and corporate tax policies
Authors: Kang, Minwook
Ye, Sandy Lei
Keywords: Social sciences::Economic theory
Issue Date: 2019
Source: Kang, M. & Ye, S. L. (2019). Present bias and corporate tax policies. Journal of Public Economic Theory, 21(2), 265-290.
Journal: Journal of Public Economic Theory
Abstract: Two major forms of corporate tax policies are dividend and profits taxes. Based on conventional corporate theory, these tax policies distort the firm's investment decisions and decrease firm value. However, this paper shows that under hyperbolically discounted preferences, dividend taxation is capable of boosting firm investment in a value-enhancing way. The hyperbolically discounted present value can be interpreted as reflecting irrational myopic preferences or, as we demonstrate, reduced-form implications of corporate agency issues. Both cases result in an underinvestment problem for the firm, but the firm valuation criteria differ. The optimal taxation issue is discussed under a Cobb–Douglas production function setting.
ISSN: 1097-3923
DOI: 10.1111/jpet.12349
Rights: © 2019 Wiley Periodicals, Inc. All rights reserved.
Fulltext Permission: none
Fulltext Availability: No Fulltext
Appears in Collections:SSS Journal Articles

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