Effects of tax rate changes on the cost of capital: The case of Japanese firms

Keiichi Kubota; Hitoshi Takehara

doi:10.1628/001522107X220062

Effects of tax rate changes on the cost of capital: The case of Japanese firms

Keiichi Kubota^*, Hitoshi Takehara

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

3 Citations (Scopus)

Abstract

The paper studies the effects that tax rate changes have on the cost of capital when firms follow target leverage ratios. We show that changes in individual income tax rates are neutral. The focus therefore is on the effects of changes in marginal corporate tax rates. These effects are computed for Japanese firms. Special emphasis is given to changes in statutory tax rates and provisions that allow firms to carry their losses forward.

Original language	English
Pages (from-to)	163-185
Number of pages	23
Journal	FinanzArchiv
Volume	63
Issue number	2
DOIs	https://doi.org/10.1628/001522107X220062
Publication status	Published - 2007 Jun 1
Externally published	Yes

Keywords

Cost of capital
Effective marginal tax rates in Japan
Graham's simulation method
Loss carry-forward
Miller equilibrium

ASJC Scopus subject areas

Finance

Access to Document

10.1628/001522107X220062

Cite this

@article{c91cdcdc0ac445d89fd99a14933fa7a5,

title = "Effects of tax rate changes on the cost of capital: The case of Japanese firms",

abstract = "The paper studies the effects that tax rate changes have on the cost of capital when firms follow target leverage ratios. We show that changes in individual income tax rates are neutral. The focus therefore is on the effects of changes in marginal corporate tax rates. These effects are computed for Japanese firms. Special emphasis is given to changes in statutory tax rates and provisions that allow firms to carry their losses forward.",

keywords = "Cost of capital, Effective marginal tax rates in Japan, Graham's simulation method, Loss carry-forward, Miller equilibrium",

author = "Keiichi Kubota and Hitoshi Takehara",

year = "2007",

month = jun,

day = "1",

doi = "10.1628/001522107X220062",

language = "English",

volume = "63",

pages = "163--185",

journal = "FinanzArchiv",

issn = "0015-2218",

publisher = "JCB Mohr",

number = "2",

}

TY - JOUR

T1 - Effects of tax rate changes on the cost of capital

T2 - The case of Japanese firms

AU - Kubota, Keiichi

AU - Takehara, Hitoshi

PY - 2007/6/1

Y1 - 2007/6/1

N2 - The paper studies the effects that tax rate changes have on the cost of capital when firms follow target leverage ratios. We show that changes in individual income tax rates are neutral. The focus therefore is on the effects of changes in marginal corporate tax rates. These effects are computed for Japanese firms. Special emphasis is given to changes in statutory tax rates and provisions that allow firms to carry their losses forward.

AB - The paper studies the effects that tax rate changes have on the cost of capital when firms follow target leverage ratios. We show that changes in individual income tax rates are neutral. The focus therefore is on the effects of changes in marginal corporate tax rates. These effects are computed for Japanese firms. Special emphasis is given to changes in statutory tax rates and provisions that allow firms to carry their losses forward.

KW - Cost of capital

KW - Effective marginal tax rates in Japan

KW - Graham's simulation method

KW - Loss carry-forward

KW - Miller equilibrium

UR - http://www.scopus.com/inward/record.url?scp=34548014307&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=34548014307&partnerID=8YFLogxK

U2 - 10.1628/001522107X220062

DO - 10.1628/001522107X220062

M3 - Article

AN - SCOPUS:34548014307

SN - 0015-2218

VL - 63

SP - 163

EP - 185

JO - FinanzArchiv

JF - FinanzArchiv

IS - 2

ER -

Effects of tax rate changes on the cost of capital: The case of Japanese firms

Abstract

Keywords

ASJC Scopus subject areas

Access to Document

Other files and links

Fingerprint

Cite this