TY  - JOUR
AU  - Hayashi,Fumio
TI  - Taxes and Corporate Investment in Japanese Manufacturing
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1753
PY  - 1985
Y2  - November 1985
UR  - http://www.nber.org/papers/w1753
L1  - http://www.nber.org/papers/w1753.pdf
N1  - Author contact info:
Fumio Hayashi
Hitotsubashi University
Grad. School of International Corporate Strategy
2-1-2 Hitotsubashi, Chiyoda-ku
Tokyo 101-8439
JAPAN
Tel: 81-3-5841-5652
Fax: 1-801-469-0086
E-Mail: fumio.hayashi@gmail.com
M1  - published as Fumio Hayashi. "Taxes and Corporate Investment in Japanese Manufacturing," in Charles R. Hulten, editor, "Productivity Growth in Japan and the United States" University of Chicago Press (1991)

AB  - This paper examines the impact of taxes on the incentive to invest for the Japanese manufacturing sector in the postwar period. The idyosyricratic feature of the Japanese corporation tax system as compared to the U.S. is the prevelence of tax-free reserves and the tax deductibility of a part of taxes paid by corporations in the previous year. Our formula for the tax-adjusted Q and the cost of capital incorporates this. The main conclusions areas follows. While the postulated negative relation with the cost of capital cannot be found, investment in Japanese manufacturing shows until 1974 a strong association with the tax-adjusted Q. Since the change in stock prices, not taxes, is the primary source of changes in Q, the profitability of capitalis the major determinant of investment.
ER  -