NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Taxation, Corporate Financial Policy and the Cost of Capital

Alan J. Auerbach

NBER Working Paper No. 1026 (Also Reprint No. r0442)
Issued in November 1982
NBER Program(s):   PE

The cost of capital plays an important role in the allocation of resources among competing uses in a decentralized market system. The purpose of this paper is to organize and present what is known and what is hypothesized about the effects of taxation on the incentive to invest, via the cost of capital,taking full account of important issues that arise independently from the question of taxation. Included in the analysis is a discussion of empirical findings about the interaction of inflation and taxation in influencing the incentive to invest, and a treatment of taxation and uncertainty.

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Document Object Identifier (DOI): 10.3386/w1026

Published: Auerbach, Alan J. "Taxation, Corporate Financial Policy and the Cost of Capital." The Journal of Economic Literature, Vol. 21, No. 3, (September 1983) , pp. 905-940.

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