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Author: Myron S. Scholes Publisher: ISBN: Category : Business enterprises Languages : en Pages : 62
Book Description
The 1986 Tax Act in the U.S. gradually reduced corporate tax rates from 46 percent prior to the Act to 34 percent by the middle of 1988. This reduction gave firms an incentive, in 1986 and 1987, to shift taxable income to future years when tax rates would be lower. There are substantial impediments, however, to shifting taxable income across periods (notably, offsetting tax consequences to other contracting parties and a host of nontax costs), and it becomes an empirical question as to whether the benefits of shifting taxable income are sufficient to overcome the impediments. This paper examines whether firms deferred income recognition and/or accelerated expense recognition in anticipation of these declining tax rates. We find statistically significant evidence that firms shifted gross margin from the quarter immediately preceding and anticipated decrease in tax rates to the next quarter. We estimate that, on average, the 812 firms in our sample saved approximately five hundred thousand dollars in taxes by deferring sales. At a gross margin rate of one-third, this amounts to nearly twenty billion dollars of shifted sales for our sample firms.
Author: Myron S. Scholes Publisher: ISBN: Category : Business enterprises Languages : en Pages : 62
Book Description
The 1986 Tax Act in the U.S. gradually reduced corporate tax rates from 46 percent prior to the Act to 34 percent by the middle of 1988. This reduction gave firms an incentive, in 1986 and 1987, to shift taxable income to future years when tax rates would be lower. There are substantial impediments, however, to shifting taxable income across periods (notably, offsetting tax consequences to other contracting parties and a host of nontax costs), and it becomes an empirical question as to whether the benefits of shifting taxable income are sufficient to overcome the impediments. This paper examines whether firms deferred income recognition and/or accelerated expense recognition in anticipation of these declining tax rates. We find statistically significant evidence that firms shifted gross margin from the quarter immediately preceding and anticipated decrease in tax rates to the next quarter. We estimate that, on average, the 812 firms in our sample saved approximately five hundred thousand dollars in taxes by deferring sales. At a gross margin rate of one-third, this amounts to nearly twenty billion dollars of shifted sales for our sample firms.
Author: Toby Stock Publisher: ISBN: Category : Languages : en Pages :
Book Description
There is a growing literature attempting to understand how firms react to tax incentives. A few papers examine how firms plan for anticipated statutory income tax rate reductions. Collectively this research investigates what types of income firms shift across time to reduce their tax payments. However prior research investigating which firms shift income across time has generated incomplete and inconsistent findings. This dissertation identifies which types of firms are more likely to engage in tax-motivated shifting. It addresses the inconsistent findings of prior research and it examines the extent to which firms that shift income consider the costs their shifting imposes on their customers. The Tax Reform Act of 1986 reduced corporate tax rates over two tax years. Firms should have deferred income during the rate reduction phase-in period only if the tax benefits of deferral exceeded the cost of reducing financial accounting income plus the costs the shifting firm imposed on its customers. The hypotheses tested include: (1) firms facing greater tax rate reductions defer more income than firms facing smaller tax rate reductions; (2) larger firms defer relatively more income than smaller firms because the latter are less sophisticated tax planners; (3) sellers of nondurable goods defer more gross profit than sellers of durable goods because the latter impose higher tax costs on their customers; and (4) firms with higher market power shift more gross profit than firms with lower market power because the former can force their customers to absorb some of the costs of shifting income. There is no evidence that firms facing larger tax rate decreases defer more income than firms facing lower tax rate decreases. In addition this research shows that larger firms defer relatively less income than smaller firms. Also this study finds evidence that sellers of nondurable goods defer more gross profit than sellers of durable goods. This result is consistent with shifting firms considering the tax position of their customers when deciding whether to engage in tax-motivated income shifting. Finally there is some evidence that firms with relatively higher market power shift more income than firms with less market power.
Author: George A. Plesko Publisher: ISBN: Category : Languages : en Pages :
Book Description
The Tax Reform Act of 1986 (TRA86) provided a natural experiment for analyzing the influence of taxes on corporate leverage decisions. A centerpiece of TRA86 was the lowering of the maximum statutory corporate marginal tax rate facing corporations from 46 percent to 34 percent accompanied by broad changes in the tax base, and the curtailment or elimination of numerous tax shields. This paper uses direct estimates of the effects of the tax changes on corporate marginal tax rates, focusing on the tax savings from increased leverage, and provides an estimate of the extent anticipated changes in marginal tax rates influenced corporate leverage decisions. The results show TRA86 was expected to decrease average marginal tax rates approximately 5 percentage points and decrease the dispersion of tax rates across industries. The second half of the paper tests whether the anticipated marginal tax rate changes had an effect on corporate leverage. The estimates provide support for the role of corporate taxation in firms' leverage decisions, and quantify the leverage changes in response to TRA86. In addition, since the effects of the tax change are measured directly, rather than through a proxy, an estimate of the magnitude of such changes can be made. Corporate debt in 1988 is estimated to have been $312 billion lower than it would have been in the absence of TRA86.
Author: Myron S. Scholes Publisher: ISBN: 9781292065571 Category : Languages : en Pages : 528
Book Description
For MBA students and graduates embarking on careers in investment banking, corporate finance, strategy consulting, money management, or venture capital Through integration with traditional MBA topics, Taxes and Business Strategy, Fifth Edition provides a framework for understanding how taxes affect decision-making, asset prices, equilibrium returns, and the financial and operational structure of firms. Teaching and Learning Experience This program presents a better teaching and learning experience-for you and your students: *Use a text from an active author team: All 5 authors actively teach the tax and business strategy course and provide students with relevant examples from both classroom and real-world consulting experience. *Teach students the practical uses for business strategy: Students learn important concepts that can be applied to their own lives. *Reinforce learning by using in-depth analysis: Analysis and explanatory material help students understand, think about, and retain information.
Author: Russell James Lundholm Publisher: McGraw-Hill/Irwin ISBN: 9780073309699 Category : Business enterprises Languages : en Pages : 0
Book Description
While focusing on the underlying theories of financial analysis and valuation, this work aims to answer the question, "What is this company really worth?". It takes the view that sound forecasts of financial statements are the key input to a good valuation, and that other aspects of the valuation process are mechanical.
Author: David Hay Publisher: Routledge ISBN: 1136210350 Category : Business & Economics Languages : en Pages : 387
Book Description
Auditing has been a subject of some controversy, and there have been repeated attempts at reforming its practice globally. This comprehensive companion surveys the state of the discipline, including emerging and cutting-edge trends. It covers the most important and controversial issues, including auditing ethics, auditor independence, social and environmental accounting as well as the future of the field. This handbook is vital reading for legislators, regulators, professionals, commentators, students and researchers involved with auditing and accounting. The collection will also prove an ideal starting place for researchers from other fields looking to break into this vital subject.
Author: Robert W. McGee Publisher: Springer Science & Business Media ISBN: 9780387257112 Category : Business & Economics Languages : en Pages : 670
Book Description
Topics in this comprehensive survey include bureaucracy, corruption and tax compliance; public finance in developing economies; taxation in several former Soviet republics, Eastern Europe and China; taxation in the enlarged European Union; tax harmonization vs. tax competition; and the philosophy of taxation and public finance. The editor has assembled a stellar group of authorities to write about their areas of expertise.
Author: Bjørn Espen Eckbo Publisher: Elsevier ISBN: 0080559565 Category : Business & Economics Languages : en Pages : 1137
Book Description
This two-volume set summarizes recent research on corporate decision-making. The first volume covers measurement and theoretical subjects as well as sources of capital, including banks, public offerings, and private investors. In the second volume, contributors focus on the ways corporations are structured and the practices through which they can be bought and sold. Thus, its major subjects include dividends, capital structure, financial distress, takeovers, restructurings, and managerial incentives. - Takes stock of the main empirical findings to date across an unprecedented spectrum of corporate finance issues - Discusses everything from econometric methodology, to raising capital and capital structure choice, and to managerial incentives and corporate investment behavior - Contributors are leading empirical researchers that remain active in their respective areas of expertise - Writing style makes the chapters accessible to industry practitioners
Author: Myron S. Scholes
Author: Myron S. Scholes
Author: Toby Stock
Author: George A. Plesko
Author: Myron S. Scholes
Author: Russell James Lundholm
Author: Joel Slemrod
Author: David Hay
Author: 
Author: Robert W. McGee
Author: Bjørn Espen Eckbo