Tax accounting principles and corporate risk-taking
Becker J, Steinhoff 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
Research article (journal)
Peer reviewed
Yes
Publication status
Published
Year
2014
Journal
Economics Letters
Volume
125
Issue
1
Start page
79
End page
81
Language
English
ISSN
01651765
DOI