Alan L. Tucker, Lallon Pond, The Probability Distribution of Foreign Exchange Price Changes: Tests of Candidate Processes, The Review of Economics and Statistics, Vol. 70, No. 4 (Nov., 1988), pp. 638-647

Joseph P. Ogden, Alan L. Tucker, The Relative Valuation of American Currency Spot and Futures Options: Theory and Empirical Tests, The Journal of Financial and Quantitative Analysis, Vol. 23, No. 4 (Dec., 1988), pp. 351-368

We gather a unique sample of 44 tax shelter cases to investigate the magnitude of tax shelter activity and whether participating in a shelter is related to corporate debt policy. The average annual deduction produced by the shelters in our sample is very large, equaling approximately nine percent of asset value. These deductions are more than three times as large as interest deductions for comparable companies. The firms in our sample use less debt when they engage in tax sheltering. Compared to companies with similar pre-shelter debt ratios, the debt ratios of firms engaged in tax shelters fall by about 8%. The tax shelter firms in our sample appear underlevered if shelters are ignored but do not appear underlevered once shelters are considered.

Jimmy E. Hilliard, Jeff Madura, Alan L. Tucker, Currency Option Pricing with Stochastic Domestic and Foreign Interest Rates, The Journal of Financial and Quantitative Analysis, Vol. 26, No. 2 (Jun., 1991), pp. 139-151

We provide a tradeoff model of the capital structure that allows leverage to be a function of a firm’s choice of tax aggressiveness. The model’s testable implications are supported empirically. Debt use is inversely related to corporate tax aggression for most firms, and the relation is economically important. This substitution effect is especially evident for firms exhibiting high tax-shelter prediction scores. The effect attenuates for benign forms of tax avoidance and during the recent credit crisis period. For the most profitable firms, debt and tax aggression are complements. Our results extend the empirical findings of Graham and Tucker (2006).

Currency call option transactions data and the Black‐Scholes option pricing model, as modified by Merton for continuous dividends and as adapted to currency options by Biger and Hull and by Garman and Kohlhagen, are used to imply spot foreign exchange rates. The proportional deviation between implied and simultaneously observed spot rates is found to be a direct and statistically significant determinant of subsequent returns on foreign currency holdings after controlling for interest rate differentials. Further, an ex ante trading rule reveals that the additional information contained in implied rates often is sufficient to generate significant economic profits.