Journal of Financial Economics Vol. 42 No. 2 1996
Proxies for the corporate marginal tax rate
Abstract
This paper focuses on how best to measure the corporate marginal tax rate, which is an important input into financial analysis of the cost of capital, financing policy, corporate hedging, and corporate reorganizations. The results indicate that the simulated tax rate used by Shevlin (1990) and Graham (1996), although difficult to calculate, is the best available proxy for the ‘true’ marginal tax rate. If the simulated rate is unavailable, an easy-to-calculate trichotomous variable or the statutory marginal tax rate (which captures the progressivity in the tax schedule) are reasonable alternatives, better than most commonly used tax variables.
- DOI
- 10.1016/0304-405x(96)00879-3
- Volume
- 42
- Issue
- 2
- Pages
- 187-221
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref