Details
| Original language | English |
|---|---|
| Pages (from-to) | 1111-1141 |
| Number of pages | 31 |
| Journal | Journal of Business Economics |
| Volume | 84 |
| Issue number | 8 |
| Publication status | Published - Nov 2014 |
Abstract
By taking explicit account of liability limitations, we analyse the influence of taxes on the simultaneous choice of organizational form and financing. In a two-state model for a single reporting period investors striving for maximisation of expected utility choose the organizational form (with or without liability limitation) in which they implement a given risky real investment and decide how they finance it (equity or debt). We demonstrate that liability limitations result in tax-relevant differences between organizational forms. Thus, for example, the tax bases differ in relation to the chosen liability-contingent debt capital compensations as well as to tax loss offset rules. Therefore, even in the event of identical tax rates, taxes can influence the decision regarding the organizational form.
Keywords
- Choice of organizational form, Company taxation, Financing neutrality, Liability limitation, Organizational form neutrality
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Business and International Management
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
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In: Journal of Business Economics, Vol. 84, No. 8, 11.2014, p. 1111-1141.
Research output: Contribution to journal › Article › Research › peer review
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TY - JOUR
T1 - Taxes, risky investments, and the simultaneous choice of organizational form and financing
AU - Blaufus, Kay
AU - Mantei, Britta
PY - 2014/11
Y1 - 2014/11
N2 - By taking explicit account of liability limitations, we analyse the influence of taxes on the simultaneous choice of organizational form and financing. In a two-state model for a single reporting period investors striving for maximisation of expected utility choose the organizational form (with or without liability limitation) in which they implement a given risky real investment and decide how they finance it (equity or debt). We demonstrate that liability limitations result in tax-relevant differences between organizational forms. Thus, for example, the tax bases differ in relation to the chosen liability-contingent debt capital compensations as well as to tax loss offset rules. Therefore, even in the event of identical tax rates, taxes can influence the decision regarding the organizational form.
AB - By taking explicit account of liability limitations, we analyse the influence of taxes on the simultaneous choice of organizational form and financing. In a two-state model for a single reporting period investors striving for maximisation of expected utility choose the organizational form (with or without liability limitation) in which they implement a given risky real investment and decide how they finance it (equity or debt). We demonstrate that liability limitations result in tax-relevant differences between organizational forms. Thus, for example, the tax bases differ in relation to the chosen liability-contingent debt capital compensations as well as to tax loss offset rules. Therefore, even in the event of identical tax rates, taxes can influence the decision regarding the organizational form.
KW - Choice of organizational form
KW - Company taxation
KW - Financing neutrality
KW - Liability limitation
KW - Organizational form neutrality
UR - http://www.scopus.com/inward/record.url?scp=84989825872&partnerID=8YFLogxK
U2 - 10.1007/s11573-014-0713-9
DO - 10.1007/s11573-014-0713-9
M3 - Article
AN - SCOPUS:84989825872
VL - 84
SP - 1111
EP - 1141
JO - Journal of Business Economics
JF - Journal of Business Economics
SN - 0044-2372
IS - 8
ER -