On the Value and Determinants of the Interest Tax Shields
Abstract
We use a dynamic model of the rm to ascertain both the value and the determinants of the
tax bene ts of debt. A standard parameterization suggests that the value of the interest tax
shields represents around 3% of rm value, and it varies considerably across industries. In
addition, our results show that this component of the stock price behaves countercyclically
over the business cycle. Finally, besides the interest rate on debt and the corporate income
tax rate, we nd that the curvature of the production function is one of the most important
determinants of the tax advantage of debt.
Description
SSRN-id2499835
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.Collections
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