Present bias and corporate tax policies
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...
| Main Authors: | , |
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| Other Authors: | |
| Format: | Journal Article |
| Language: | English |
| Published: |
2021
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| Online Access: | https://hdl.handle.net/10356/150210 |
| _version_ | 1826122743122231296 |
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| author | Kang, Minwook Ye, Sandy Lei |
| author2 | School of Social Sciences |
| author_facet | School of Social Sciences Kang, Minwook Ye, Sandy Lei |
| author_sort | Kang, Minwook |
| collection | NTU |
| description | 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. |
| first_indexed | 2024-10-01T05:53:10Z |
| format | Journal Article |
| id | ntu-10356/150210 |
| institution | Nanyang Technological University |
| language | English |
| last_indexed | 2024-10-01T05:53:10Z |
| publishDate | 2021 |
| record_format | dspace |
| spelling | ntu-10356/1502102021-06-09T06:38:44Z Present bias and corporate tax policies Kang, Minwook Ye, Sandy Lei School of Social Sciences Social sciences::Economic theory Time Preference Intertemporal Choice 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. 2021-06-09T06:38:44Z 2021-06-09T06:38:44Z 2019 Journal Article Kang, M. & Ye, S. L. (2019). Present bias and corporate tax policies. Journal of Public Economic Theory, 21(2), 265-290. https://dx.doi.org/10.1111/jpet.12349 1097-3923 0000-0003-2369-7894 https://hdl.handle.net/10356/150210 10.1111/jpet.12349 2-s2.0-85059539244 2 21 265 290 en Journal of Public Economic Theory © 2019 Wiley Periodicals, Inc. All rights reserved. |
| spellingShingle | Social sciences::Economic theory Time Preference Intertemporal Choice Kang, Minwook Ye, Sandy Lei Present bias and corporate tax policies |
| title | Present bias and corporate tax policies |
| title_full | Present bias and corporate tax policies |
| title_fullStr | Present bias and corporate tax policies |
| title_full_unstemmed | Present bias and corporate tax policies |
| title_short | Present bias and corporate tax policies |
| title_sort | present bias and corporate tax policies |
| topic | Social sciences::Economic theory Time Preference Intertemporal Choice |
| url | https://hdl.handle.net/10356/150210 |
| work_keys_str_mv | AT kangminwook presentbiasandcorporatetaxpolicies AT yesandylei presentbiasandcorporatetaxpolicies |