Show simple item record

Risky tax shields and risky debt: An exploratory study

dc.creatorVélez-Pareja I.
dc.identifier.citationCuadernos de Administracion; Vol. 23, Núm. 41; pp. 213-235
dc.description.abstractThis article (1) identifies three sources of risk for tax shields (TS): Two of them are associated with debt risk and one is associated with operating risk. (2) A set of conditions for defining risky debt associated with cash flow, not with earnings, is presented. (3) It further shows that realization of TS for finite cash flows in a period of time t is correlated with Earnings before Interest and Taxes (EBIT) plus Other Income (EBITO), not with interest expenses at time t. With the results of a Montecarlo Simulation the behavior of TS, Cash Flow to Debt and EBITO are examined. In conclusion, the article suggests that it is not reasonable to define the risk of TS as measured by a single discount rate, but rather as a mix of debt risk and operating risk.eng
dc.format.mediumRecurso electrónico
dc.titleRisky tax shields and risky debt: An exploratory study
dc.title.alternativeEstudios fiscals riesgosos y deuda con riesgo: Un studio exploratorio
dcterms.bibliographicCitationArzac, E.R., Glosten, L.R., A Reconsideration of Tax Shield Valuation (2005) European Financial Management, 11 (4), pp. 453-461
dcterms.bibliographicCitation(2006) International Convergence of Capital Measurement and Capital Standards a Revised Framework, ,, Bank for International Settlements, Basel Committee on Banking Supervision, Retrieved on November 29, 2010
dcterms.bibliographicCitationBrealey, R.A., Myers, S.C., (2003) Principles of Corporate Finance, , 7th ed, New York: Mc-Graw-Hill
dcterms.bibliographicCitationCordes, J.J., Sheffrin, S.M., Estimating the Tax Advantage of Corporate Debt (1983) The Journal of Finance, 38 (1), pp. 95-105
dcterms.bibliographicCitationDammon, R.M., Senbet, L.W., The Effect of Taxes and Depreciation on Corporate Investment and Financial Leverage (1988) The Journal of Finance, 43 (2), pp. 357-373
dcterms.bibliographicCitationDamodaran, A., (2002) Investment Valuation, ,, 2nd Ed, Hoboken, N.J.: John Wiley & Sons
dcterms.bibliographicCitationDamodaran, A., Valuation Approaches and Metrics: A Survey of the Theory and Evidence (2005) Foundations and Trends In Finance, 1 (8), pp. 693-784. ,
dcterms.bibliographicCitationDíaz, G., Vélez-Pareja, I., (2010) Estimating the Appropriate Risk Profile For the Tax Savings: A Contingent Claim Approach, ,, Working paper
dcterms.bibliographicCitationLey 55: Solo 10 Empresas Salvadas, ,, El Tiempo (2004, August 10), Retrieved on Nov 2, 2010
dcterms.bibliographicCitationFama, E.F., French, K.R., Taxes, Financing Decisions, and Firm Value (1998) The Journal of Finance, 53 (3), pp. 819-843
dcterms.bibliographicCitationGrabowski, R.J., Problems with Cost of Capital Estimation in the Current Environment (2009) Journal of Applied Research In Accounting and Finance (JARAF), 4 (1), pp. 31-40
dcterms.bibliographicCitationGraham, J.R., How big are the tax benefits of debt? (2000) The Journal of Finance, 55 (5), pp. 1901-1941
dcterms.bibliographicCitationHarris, R.S., Pringle, J.J., Risk-Adjusted Discount Rates-Extensions from the Average-Risk Case (1985) Journal of Financial Research, 8, pp. 237-244
dcterms.bibliographicCitationKaplan, S.N., Ruback, R.S., The Valuation of Cash Flow Forecasts: An Empirical Analysis (1995) The Journal of Finance, 50 (4), pp. 1059-1093
dcterms.bibliographicCitationKemsley, D., Nissim, D., Valuation of the Debt Tax Shield (2002) The Journal of Finance, 57 (5), pp. 2045-2073
dcterms.bibliographicCitationKolari, J.W., Vélez-Pareja, I., (2010) Corporation Income Taxes and The Cost of Capital: A Revision, ,, Working paper
dcterms.bibliographicCitationLewellen, W.G., Emery, D.R., Corporate Debt Management and the Value of the Firm (1986) The Journal of Financial and Quantitative Analysis, 21 (4), pp. 415-426
dcterms.bibliographicCitationLuehrman, T., Using APV: A Better Tool for Valuating Operations (1997) Harvard Business Review, pp. 145-154. , May-June
dcterms.bibliographicCitationMiles, J.A., Ezzell, J.R., Reformulating Tax Shield Valuation: A Note (1985) The Journal of Finance, 40 (5), pp. 1485-1492
dcterms.bibliographicCitationModigliani, F., Miller, M.H., The Cost of Capital, Corporation Taxes and the Theory of Investment (1958) The American Economic Review, 48, pp. 261-297
dcterms.bibliographicCitationModigliani, F., Corporate Income Taxes and the Cost of Capital: A Correction (1963) American Economic Review, 53 (3), pp. 443-453
dcterms.bibliographicCitationMyers, S.C., Interactions of Corporate Financing and Investment Decisions-Implications for Capital Budgeting (1974) The Journal of Finance, 29 (1), pp. 1-25
dcterms.bibliographicCitationNewbould, G.D., Chatfield, R.E., Anderson, R.F., Leveraged Buyouts and Tax Incentives (1992) Financial Management, 21 (1), pp. 50-57
dcterms.bibliographicCitationRuback, R.S., Capital Cash Flows: A Simple Approach to Valuing Risky Cash Flows (2002) Financial Management, 31 (2), pp. 85-103
dcterms.bibliographicCitation(2010) Sirem, ,, Superintendencia de Sociedades, Retrieved on June 11, 2010
dcterms.bibliographicCitationTaggart Jr., R.A., Consistent Valuation and Cost of Capital: Expressions with Corporate and Personal Taxes (1991) Financial Management (Autumn), pp. 8-20
dcterms.bibliographicCitationTalmor, E., Haugen, R., Barnea, A., The Value of the Tax Subsidy on Risky Debt (1985) The Journal of Business, 58 (2), pp. 191-202
dcterms.bibliographicCitationTham, J., Vélez-Pareja, I., (2001) The Correct Discount Rate For the Tax Shield: The N-period Case (April), ,, doi:10.2139/ssrn.267962
dcterms.bibliographicCitationTham, J., (2004) Principles of Cash Flow Valuation: An Integrated Market-based Approach, , Boston: Academic Press
dcterms.bibliographicCitationTham, J., Cost of Capital With Levered Cost of Equity As the Risk of Tax Shields, ,, 2010, August 9, Working paper
dcterms.bibliographicCitation(2010) Table F-2: U.S. Bankruptcy Courts, ,, U.S. Courts, Retrieved on August 7, 2010
dcterms.bibliographicCitation(2010) Statistics of U.S. Businesses, Business Dynamics Statistics, Business Employment Dynamics, and Nonemployer Statistics, ,, U.S. Small Business Administration, Retrieved on Nov. 2, 2010
dcterms.bibliographicCitation(2010) Private Firms, Establishments, Employment, Annual Payroll and Receipts By Firm Size, 1988-2007 [table], ,, U.S. Small Business Administration, Office of Advocacy, August 7, 2010
dcterms.bibliographicCitationVélez-Pareja, I., Return to Basics: Are You Properly Calculating Tax Shields?, ,, 2009, July
dcterms.bibliographicCitationVélez-Pareja, I., Calculating Tax Shields From Financial Expense With Losses Carried Forward, ,, 2010, May
dcterms.bibliographicCitationViana Rojas, J., Más empresas buscaron su salvación en el primer trimestre
dcterms.bibliographicCitationcrisis empezó a pasar cuenta de cobro Portafolio, , B-NOTA_INTERIOR_PORTA-5171194.html, 2009, May 11, Retrieved on Nov 2, 2010
dcterms.bibliographicCitation(2010) Total Businesses Registered (number), ,, World Bank, Nov. 2, 2010
dcterms.bibliographicCitationWrightsman, D., Tax Shield Valuation and the Capital Structure Decision (1978) The Journal of Finance, 33 (2), pp. 650-656
dc.subject.keywordsCash flows
dc.subject.keywordsDiscount rate for tax shields
dc.subject.keywordsFirm valuation
dc.subject.keywordsMontecarlo simulation
dc.subject.keywordsTax shields
dc.subject.keywordsWeighted average cost of capital
dc.rights.ccAtribución-NoComercial 4.0 Internacional
dc.identifier.instnameUniversidad Tecnológica de Bolívar
dc.identifier.reponameRepositorio UTB

Files in this item


There are no files associated with this item.

This item appears in the following Collection(s)

Show simple item record
Except where otherwise noted, this item's license is described as