2018

Does the Debt Tax Shield Distort Ownership Efficiency?

Reprint No. 2018:11

Author(s): Pehr-Johan Norbäck, Lars Persson and Joacim TågYear: 2018 Title: International Review of Economics & Finance Volume (No.): 54 (March) Pages: 299–310
Online article (restrictions may apply)


The tax laws of most developed countries are debt biased since firms can deduct interest on debt but not on equity. This bias is known to distort investment decisions. However, less is known about how the debt tax shield affects the ownership of assets when bidders differ financial expertise and thus in optimal use of leverage. We show that the debt tax shield need not always distort ownership efficiency. Assets end up with the socially preferred owner when differences in financial and productive expertise between bidders is small and better financial expertise reduces expected bankruptcy costs.


Reference:
Norbäck, Pehr-Johan, Lars Persson and Joacim Tåg (2018), "Does the Debt Tax Shield Distort Ownership Efficiency?". International Review of Economics & Finance 54(March), 299–310.

Pehr-Johan Norbäck

Contact

Ph: +46 8 665 4522
Mob: +46 73 574 3379
pehr-johan.norback@if...

Lars Persson

Contact

Ph: +46 8 665 4504
lars.persson@ifn.se

Joacim Tåg

Contact

Ph: +46 8 665 4524
joacim.tag@ifn.se

An Agenda for Europe

Institutional Reform for Innovation and Entrepreneurship

Omslag 2017 Institutional Reform for Innovation and Entrepreneurship.jpg

The authors of this book, Niklas Elert, Magnus Henrekson and Mikael Stenkula, advise the economies of the European Union to become more entrepreneurial in promoting innovation and economic growth. The authors propose a reform strategy with respect to several aspects to achieve this goal.

Events

Seminars organized by IFN

 

To present ongoing research informal brown-bag seminars are held on Mondays at 11:30 am. This is an opportunity for IFN researchers to test ideas and results.

Academically oriented seminars are most of the time held on Wednesdays at 10 am. At these events researchers from IFN and other institutions present their research.

In addition, IFN organizes seminars open to the public. Topics for these are derived from the IFN research.

Research Institute of Industrial Economics, Grevgatan 34 - 2 fl, Box 55665, SE-102 15 Stockholm, Sweden | Phone: +46-(0)8-665 45 00 | info@ifn.se