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Cross Country Evidence On The Relation Between Capital Gains Taxes Risk And Expected Returns
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Book Synopsis Cross-Country Evidence on the Relation Between Capital Gains Taxes, Risk, and Expected Returns by : Luzi Hail
Download or read book Cross-Country Evidence on the Relation Between Capital Gains Taxes, Risk, and Expected Returns written by Luzi Hail and published by . This book was released on 2016 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study empirically examines the role of risk sharing between taxable investors and the government on the relation between capital gains taxes and expected returns. Specifically, using an international panel from 26 countries over the period 1990 to 2004, we find evidence that the general positive relation between capital gains taxes and expected returns becomes weaker or even reverses when (i) a firm's systematic risk is high, (ii) the market risk premium is high, or (iii) the risk-free rate is low. The results are particularly pronounced in countries with substantive changes in tax rates, more trust in government institutions, less integrated and less liquid capital markets, and lower foreign institutional ownership as well as around substantive increases and decreases in the risk parameters. We corroborate our findings in a single country setting, using the 1978, 1997, and 2003 capital gains tax rate changes in the United States as events. Our results underscore the importance of macroeconomic and firm-specific factors in determining the effect of tax capitalization, and suggest that tax rate changes can sometimes have opposite valuation implications than what policymakers have in mind.
Book Synopsis International Evidence on the Effects of Having No Capital Gains Taxes by : Fraser Institute (Vancouver, B.C.)
Download or read book International Evidence on the Effects of Having No Capital Gains Taxes written by Fraser Institute (Vancouver, B.C.) and published by The Fraser Institute. This book was released on 2001 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Capital Gains Taxes and Expected Rates of Return by : Stephanie A. Sikes
Download or read book Capital Gains Taxes and Expected Rates of Return written by Stephanie A. Sikes and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior literature predicts a positive relation between firms' expected pre-tax rates of return and investor-level capital gains tax rates. We show that this relation is more nuanced than suggested by prior literature and that in three circumstances the relation can actually be negative. The first circumstance is when a firm's systematic risk is very high. The second circumstance is when the market risk premium is very high. The third circumstance is when the risk-free rate of return is very low. The circumstances arise because in addition to reducing investors' expected after-tax cash proceeds, capital gains taxes reduce the risk that investors associate with the expected after-tax cash proceeds.
Book Synopsis Capital Gains Taxes and Realizations by : William T. Bogart
Download or read book Capital Gains Taxes and Realizations written by William T. Bogart and published by . This book was released on 1993 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Capital Gains Taxation and Realizations by : William T. Bogart
Download or read book Capital Gains Taxation and Realizations written by William T. Bogart and published by . This book was released on 1993 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Despite numerous studies of the relation between income taxes and capital garns realizations, the revenue consequences of reducing capital gains tax rates remain unclear. However, an important source of cross-sectional variation has been neglected in this line of research: since both the tax base and the tax rate vary among states, the marginal tax rate on capital gains differs among otherwise identical individuals located in different states. The interstate variation in the tax consequences of realizing capital gains implies that the incentive to realize gains varies across states. This paper documents the interstate variation in capital gains taxation and examines the relation between capital gains taxes and aggregated state-level realizations. For each state, we construct marginal tax rates on capital gains for the highest state income tax bracket for 1982 through 1990. Using state-level aggregated data rather than data on individual taxpayers alleviates the problem that the marginal tax rate is endogenous to the amount of capital gains realized. Panel estimates indicate that capital gains realizations are negatively related to capital gains tax rates. The estimated elasticity is smaller than that found by most researchers using panel data, with a point estimate of - 0.67 in our basic specification.
Book Synopsis Capitalization of Capital Gains Taxes by : Mark Harold Lang
Download or read book Capitalization of Capital Gains Taxes written by Mark Harold Lang and published by . This book was released on 1999 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: We empirically document that stock prices moved inversely with dividend yields during the May, 1997 week, when the White House and Congress agreed on a budget accord that included a reduction in the capital gains tax rate. The share prices of firms not currently paying dividends increased approximately 6 percentage points more over a five-day window than the share prices of other firms. Among firms paying dividends, the change in share prices was decreasing in dividend yields. The results are consistent with at least two related explanations. First, to the extent a stock's returns are expected to be taxed as capital gains, a reduction in the expected capital gains tax rate enhances the attractiveness of the investment to investors. Second, to the extent a firm's stock is held by shareholders subject to the capital gains tax, a reduction in the expected capital gains tax rate increases its market value. The findings present evidence consistent with neither a sell-off of appreciated securities following the rate reduction nor a reduction in the compensation for capital gains taxes that selling shareholders demand from buyers. The upward price pressure around the accord dominated any downward price pressure imposed by these factors
Book Synopsis Taxing Corporate Income in the 21st Century by : Alan J. Auerbach
Download or read book Taxing Corporate Income in the 21st Century written by Alan J. Auerbach and published by Cambridge University Press. This book was released on 2007-04-16 with total page 401 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book was first published in 2007. Most countries levy taxes on corporations, but the impact - and therefore the wisdom - of such taxes is highly controversial among economists. Does the burden of these taxes fall on wealthy shareowners, or is it passed along to those who work for, or buy the products of, corporations? Can a country with high corporate taxes remain competitive in the global economy? This book features research by leading economists and accountants that sheds light on these and related questions, including how taxes affect corporate dividend policy, stock market value, avoidance, and evasion. The studies promise to inform both future tax policy and regulatory policy, especially in light of the Sarbanes-Oxley Act and other actions by the Securities and Exchange Commission that are having profound effects on the market for tax planning and auditing in the wake of the well-publicized accounting scandals in Enron and WorldCom.
Book Synopsis Capital Gains Taxation and the Cost of Capital by : Harry Huizinga
Download or read book Capital Gains Taxation and the Cost of Capital written by Harry Huizinga and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In a cross-border takeover, the tax base associated with future capital gains is transferred from target shareholders to acquirer shareholders. Cross-country differences in capital gains tax rates enable us to estimate the discount in target valuation on account of future capital gains. A one percentage point increase in the capital gains tax rate reduces the value of equity by 0.225%. The implied average effective tax rate on capital gains is 7% and it raises the cost of capital by 5.3% of its no-tax level. This indicates that capital gains taxation is a significant cost to firms when issuing new equity.
Book Synopsis Capitalization of Capital Gains Taxes by : Mark H. Lang
Download or read book Capitalization of Capital Gains Taxes written by Mark H. Lang and published by . This book was released on 2012 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: We empirically document that stock prices moved inversely with dividend yields during the May, 1997 week, when the White House and Congress agreed on a budget accord that included a reduction in the capital gains tax rate. The share prices of firms not currently paying dividends increased approximately 6 percentage points more over a five-day window than the share prices of other firms. Among firms paying dividends, the change in share prices was decreasing in dividend yields. The results are consistent with at least two related explanations. First, to the extent a stock's returns are expected to be taxed as capital gains, a reduction in the expected capital gains tax rate enhances the attractiveness of the investment to investors. Second, to the extent a firm's stock is held by shareholders subject to the capital gains tax, a reduction in the expected capital gains tax rate increases its market value. The findings present evidence consistent with neither a sell-off of appreciated securities following the rate reduction nor a reduction in the compensation for capital gains taxes that selling shareholders demand from buyers. The upward price pressure around the accord dominated any downward price pressure imposed by these factors.
Book Synopsis The Capital Gains Controversy by : J. Andrew Hoerner
Download or read book The Capital Gains Controversy written by J. Andrew Hoerner and published by . This book was released on 1992 with total page 518 pages. Available in PDF, EPUB and Kindle. Book excerpt: A collection of documentation regarding the treatment of capital gains in the United States. Articles by economists, lawyers, Treasury Department officials, and congressional testimony. Chapters include general assessment of capital gains taxation, capital gains revenue estimates, capital gains and economic growth, fairness and distributional equity, inflation and indexing, designing a capital gains tax preference.
Book Synopsis Alternative Approaches to Capital Gains Taxation by : Martin Heidenhain David
Download or read book Alternative Approaches to Capital Gains Taxation written by Martin Heidenhain David and published by . This book was released on 1968 with total page 304 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Corporate Valuation by : Robert W. Holthausen
Download or read book Corporate Valuation written by Robert W. Holthausen and published by . This book was released on 2019 with total page 925 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Exchequer effect of the 50 per cent additional rate of income tax by : Great Britain: H.M. Revenue & Customs
Download or read book The Exchequer effect of the 50 per cent additional rate of income tax written by Great Britain: H.M. Revenue & Customs and published by The Stationery Office. This book was released on 2012-03-21 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is one of the accompanying documents to the 2012 Budget (ISBN 9790102976045) and examines the impact to the Exchequer of the 50% additional rate of income tax, introduced on 6 April 2010. The report seeks to provide the first comprehensive ex-post assessment of the additional rate yield using a range of evidence including 2010-11 Self Assessment returns. Analysis shows that there was a considerable behavioural response to the income tax rate change, including a substantial amount of forestalling, with an estimated £16 to £18 billion of income brought forward to the 2009-10 to avoid the tax increase. The net result of such actions is that the underlying yield from the additional rate was much lower that forecast. The report also describes how the impact of introducing the additional rate may extend well beyond the Exchequer, with the view that higher tax rates make the tax system less competitive and therefore less attractive to establish a business.The publication is divided into six chapters with three annexes.
Book Synopsis Capital Gains Overhang and the Closed-end Fund Puzzle, And, Economic Significance and Arbitrage of Idiosyncratic Risk by : David Manzler
Download or read book Capital Gains Overhang and the Closed-end Fund Puzzle, And, Economic Significance and Arbitrage of Idiosyncratic Risk written by David Manzler and published by . This book was released on 2007 with total page 144 pages. Available in PDF, EPUB and Kindle. Book excerpt: The dissertation is divided into two chapters. Chapter I examines the impact of capital gains distribution rules on a closed-end fund (CEF) manager's incentive to collect and trade on information. The central hypothesis is that the treatment of realized capital gains embodied in the U.S. tax code, combined with the form of compensation contract offered CEF mangers, creates an "overhang" effect on CEF managers' incentives to optimally trade the fund portfolio. We model the overhang effect and show that (1) there exists an equilibrium in which CEF managers collect private information in the early stages of the fund (when no lock-in effect exists) but then choose to be uninformed in later stages (when the lock-in effect exists), and (2) rational-expectations pricing of the expected cash flows and risk resulting from the information equilibrium results in CEFs initially trading at a premium and subsequently trading at a discount. In addition, we examine the empirical implications from the model and find, consistent with the model, a significant negative relation between future risk adjusted performance and current unrealized capital gains as well a significant positive relation between NAV premiums and future risk adjusted performance. In addition we show there are two separate effects from unrealized capital gains: (1) the Malkiel (1977) tax effect on CEF investors and (2) the manager incentive-capital gain related effect. Chapter II examines the economic significance of idiosyncratic risk in the context of arbitrage profits as well the robustness of idiosyncratic risk estimates relative to additional known systematic risks. We estimate idiosyncratic risk using both rolling and single time-series EGARCH methods and form high and low idiosyncratic risk portfolios. After controlling for liquidity risk and momentum, we conclude that abnormal returns to idiosyncratic risk arbitrage strategies are not statistically and/or economically significant. Furthermore we find no evidence of priced idiosyncratic risk in closed-end funds. Finally, we find no relation between idiosyncratic risk and stock returns in Fama-MacBeth cross-sectional regressions.
Book Synopsis Debt Bias and Other Distortions by : International Monetary Fund. Fiscal Affairs Dept.
Download or read book Debt Bias and Other Distortions written by International Monetary Fund. Fiscal Affairs Dept. and published by International Monetary Fund. This book was released on 2009-12-06 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: Tax distortions are likely to have encouraged excessive leveraging and other financial market problems evident in the crisis. These effects have been little explored, but are potentially macro-relevant. Taxation can result, for example, in a net subsidy to borrowing of hundreds of basis points, raising debt-equity ratios and vulnerabilities from capital inflows. This paper reviews key channels by which tax distortions can significantly affect financial markets, drawing implications for tax design once the crisis has passed.
Book Synopsis On the Relation Between Expected Returns and Implied Cost of Capital by : John S. Hughes
Download or read book On the Relation Between Expected Returns and Implied Cost of Capital written by John S. Hughes and published by . This book was released on 2008 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, we examine the relation between implied cost of capital and expected returns under an assumption that expected returns are stochastic, a property supported by theory and empirical evidence. We demonstrate that implied cost of capital differs from expected return, on average, by a function encompassing volatilities of, as well as correlation between, expected returns and cash flows, growth in cash flows, and leverage. These results provide alternative explanations for findings from empirical studies employing implied cost of capital on the magnitude of the market risk premium; relations between cost of capital, growth, leverage, and idiosyncratic risks; predictability of future returns, and characteristics of the firm's information environment.
Book Synopsis Canada-U.S. Tax Comparisons by : John B. Shoven
Download or read book Canada-U.S. Tax Comparisons written by John B. Shoven and published by University of Chicago Press. This book was released on 2007-12-01 with total page 400 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the increasingly global economy, domestic tax policies have taken on a new importance for international economics. This unique volume compares the tax reform experiences of Canada and the United States, two countries with the world's largest bilateral flow of trade and investment. With the signing of the U.S.-Canada Free Trade Agreement and the tax reforms of the 1980s, there has been some harmonization of tax systems. But geographic, cultural, and political characteristics shape distinct national social policies that may impede harmonization. As the U.S. and Canadian economies become even more integrated, differences in tax systems will have important effects, in particular on the relative rates of economic growth. In this timely study, scholars from both countries show that, while the United States and Canada exhibit similar corporate tax structures and income tax systems, they have very different approaches to sales tax and social security taxes. Despite these differences, the two countries generate roughly the same amounts of revenue, produce similar costs of capital, and produce comparable distributions of income.
