This paper addresses the issue of how regulatory constraints affect a firm's investment choices when the firm has an option to delay investment. The RPI-x rule is compared to a profit-sharing rule, which increases the x factor in case profits go beyond a given level. It is shown that a pure...

This article discusses the effects of taxation on the discrete choice of alternative projects. In particular, it is shown that if taxation affects the optimal timing of irreversible investment, then the discrete choice is distorted as well. This result has both methodological and political...

This article discusses the effects of an asymmetric tax scheme on incremental and sequential investment strategies. The tax base is equal to the firm's return, net of an imputation rate. When the firm's return is less than this rate, however, no tax refunds are allowed. This scheme is neutral...

This article discusses the effects of corporate tax asymmetries under investment irreversibility. We introduce a tax scheme where the tax base is given by the firm's return net of a rate of relief. When the firm's return is less than the imputation rate, however, no tax refunds are allowed....

In this article we use contingent-claim analysis to calculate the effective tax rate (ETR) under corporate debt finance. In particular, we deal with both pure debt and two of the most well-known hybrid securities, i.e., convertible, and reverse convertible bonds. We show that: 1) effective...

This paper investigates the role of economic and political volatility in the process of corporate tax-rate determination. The article is based on a theoretical framework that allows for the ability of multinational firms to choose the optimal timing of foreign investment and to shift profits by...

The evidence shows that in most countries the present value of depreciation allowances is less than 100% of the cost of capital. In this article we use a real-option model with debt financing, and show that less favorable depreciation allowances are offset by tax benefits arising from debt...

This article studies the characteristics of an S-based tax system under default risk. In particular we show that its neutrality properties depend on whether debt is protected or unprotected. In the former case, this system is neutral. In the latter case, where default timing is optimally chosen...

This paper uses the Bad News Principle to study how the ability of multinationals to shift profits by transfer pricing affects both the timing of foreign direct investment decisions and government tax policy. A main finding of the paper is that if countries compete to attract foreign direct...

This article studies the relationship between debt policies of multinational companies (MNCs) and governments' tax strategies. In the first part, it is shown that the ability to shift income from high to low-tax countries affects MNCs' financial choices. In the second part we show how MNCs'...