Tax accounting principles and corporate risk-taking

Becker,Johannes J.,Steinhoff,Melanie M.,


Abstract
We analyze the role of business taxation for corporate risk-taking under different accounting principles (such as mark-to-market, lower-of-cost-or-market and historical cost). We demonstrate that conservative accounting may imply incentives to overinvest in risky assets. However, with imperfect loss offsets, the mark-to-market principle penalizes risky investment whereas more conservative accounting leaves the risk choice unaffected.



Publication type
Article in Journal

Peer reviewed
Yes

Publication status
Published

Year
2014

Journal
Economics Letters

Volume
125

Issue
1

Start page
79

End page
81

Pages range
79-81

Language
English

ISSN
01651765

DOI

Affiliation
Westfalische Wilhelms-Universitat Munster