Tax loss carrybacks: Investment stimulus versus misallocation

Tax regimes treat losses and profits asymmetrically when profits are immediately taxed, but losses are not immediately refunded. We find that treating losses less asymmetrically by granting refunds less restrictively increases loss firms' investment: A third of the refund is invested and the re...

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Autores: Bethmann, I. (Inga)|||/items/a35c0557-ae95-403a-a838-8b18fd7da5f3, Jacob, M. (Martin)|||/items/b4c80971-c877-4230-904c-54573540e482, Müller, M.A. (Maximilian A.)|||/items/57f6157d-c3aa-4f81-8480-14c45979d665
Tipo de recurso: artículo
Fecha de publicación:2017
País:España
Institución:Universidad de Navarra
Repositorio:Dadun. Depósito Académico Digital de la Universidad de Navarra
Idioma:inglés
OAI Identifier:oai:dadun.unav.edu:10171/119768
Acceso en línea:https://hdl.handle.net/10171/119768
Access Level:acceso abierto
Palabra clave:Corporate taxation
Tax policy
Tax loss carryback
Tax asymmetry
Tax refunds
Corporate investments
Misallocation
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network_name_str España
repository_id_str
spelling Tax loss carrybacks: Investment stimulus versus misallocationBethmann, I. (Inga)|||/items/a35c0557-ae95-403a-a838-8b18fd7da5f3Jacob, M. (Martin)|||/items/b4c80971-c877-4230-904c-54573540e482Müller, M.A. (Maximilian A.)|||/items/57f6157d-c3aa-4f81-8480-14c45979d665Corporate taxationTax policyTax loss carrybackTax asymmetryTax refundsCorporate investmentsMisallocationTax regimes treat losses and profits asymmetrically when profits are immediately taxed, but losses are not immediately refunded. We find that treating losses less asymmetrically by granting refunds less restrictively increases loss firms' investment: A third of the refund is invested and the rest is held as cash or returned to shareholders. However, the investment response is driven primarily by firms prone to engage in risky overinvestment. Consistent with the risk of misallocation, we find a delayed exit of low-productivity loss firms receiving less restrictive refunds, indicating potential distortion of the competitive selection of firms. This distortion also negatively affects aggregate output and productivity. Our results suggest that stimulating loss firms' investment with refunds unconditional on their future prospects comes at the risk of misallocation.American Accounting AssociationDadun. Depósito Académico Digital Universidad de Navarra20172017-10-0120172017-10-01journal articlehttp://purl.org/coar/resource_type/c_6501info:eu-repo/semantics/articleapplication/pdfhttps://hdl.handle.net/10171/119768reponame:Dadun. Depósito Académico Digital de la Universidad de Navarrainstname:Universidad de NavarraInglésengopen accesshttp://purl.org/coar/access_right/c_abf2info:eu-repo/semantics/openAccessoai:dadun.unav.edu:10171/1197682026-06-21T12:47:57Z
dc.title.none.fl_str_mv Tax loss carrybacks: Investment stimulus versus misallocation
title Tax loss carrybacks: Investment stimulus versus misallocation
spellingShingle Tax loss carrybacks: Investment stimulus versus misallocation
Bethmann, I. (Inga)|||/items/a35c0557-ae95-403a-a838-8b18fd7da5f3
Corporate taxation
Tax policy
Tax loss carryback
Tax asymmetry
Tax refunds
Corporate investments
Misallocation
title_short Tax loss carrybacks: Investment stimulus versus misallocation
title_full Tax loss carrybacks: Investment stimulus versus misallocation
title_fullStr Tax loss carrybacks: Investment stimulus versus misallocation
title_full_unstemmed Tax loss carrybacks: Investment stimulus versus misallocation
title_sort Tax loss carrybacks: Investment stimulus versus misallocation
dc.creator.none.fl_str_mv Bethmann, I. (Inga)|||/items/a35c0557-ae95-403a-a838-8b18fd7da5f3
Jacob, M. (Martin)|||/items/b4c80971-c877-4230-904c-54573540e482
Müller, M.A. (Maximilian A.)|||/items/57f6157d-c3aa-4f81-8480-14c45979d665
author Bethmann, I. (Inga)|||/items/a35c0557-ae95-403a-a838-8b18fd7da5f3
author_facet Bethmann, I. (Inga)|||/items/a35c0557-ae95-403a-a838-8b18fd7da5f3
Jacob, M. (Martin)|||/items/b4c80971-c877-4230-904c-54573540e482
Müller, M.A. (Maximilian A.)|||/items/57f6157d-c3aa-4f81-8480-14c45979d665
author_role author
author2 Jacob, M. (Martin)|||/items/b4c80971-c877-4230-904c-54573540e482
Müller, M.A. (Maximilian A.)|||/items/57f6157d-c3aa-4f81-8480-14c45979d665
author2_role author
author
dc.contributor.none.fl_str_mv Dadun. Depósito Académico Digital Universidad de Navarra
dc.subject.none.fl_str_mv Corporate taxation
Tax policy
Tax loss carryback
Tax asymmetry
Tax refunds
Corporate investments
Misallocation
topic Corporate taxation
Tax policy
Tax loss carryback
Tax asymmetry
Tax refunds
Corporate investments
Misallocation
description Tax regimes treat losses and profits asymmetrically when profits are immediately taxed, but losses are not immediately refunded. We find that treating losses less asymmetrically by granting refunds less restrictively increases loss firms' investment: A third of the refund is invested and the rest is held as cash or returned to shareholders. However, the investment response is driven primarily by firms prone to engage in risky overinvestment. Consistent with the risk of misallocation, we find a delayed exit of low-productivity loss firms receiving less restrictive refunds, indicating potential distortion of the competitive selection of firms. This distortion also negatively affects aggregate output and productivity. Our results suggest that stimulating loss firms' investment with refunds unconditional on their future prospects comes at the risk of misallocation.
publishDate 2017
dc.date.none.fl_str_mv 2017
2017-10-01
2017
2017-10-01
dc.type.none.fl_str_mv journal article
http://purl.org/coar/resource_type/c_6501
dc.type.openaire.fl_str_mv info:eu-repo/semantics/article
format article
dc.identifier.none.fl_str_mv https://hdl.handle.net/10171/119768
url https://hdl.handle.net/10171/119768
dc.language.none.fl_str_mv Inglés
eng
language_invalid_str_mv Inglés
language eng
dc.rights.none.fl_str_mv open access
http://purl.org/coar/access_right/c_abf2
dc.rights.openaire.fl_str_mv info:eu-repo/semantics/openAccess
rights_invalid_str_mv open access
http://purl.org/coar/access_right/c_abf2
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv American Accounting Association
publisher.none.fl_str_mv American Accounting Association
dc.source.none.fl_str_mv reponame:Dadun. Depósito Académico Digital de la Universidad de Navarra
instname:Universidad de Navarra
instname_str Universidad de Navarra
reponame_str Dadun. Depósito Académico Digital de la Universidad de Navarra
collection Dadun. Depósito Académico Digital de la Universidad de Navarra
repository.name.fl_str_mv
repository.mail.fl_str_mv
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score 15,812429

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