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Taxes, Investment and Q

J. S. S. Edwards¹; M. J. Keen²

¹ St. John's College of Nursing · ² University of Essex

This paper attempts to provide a unified analysis of the effects of taxation on the equilibrium value of marginal q under alternative financial policies. It is shown that the q approach does not avoid all the specification problems associated with analyses based on the cost of capital. The (theoretically and empirically) crucial relationship between average and marginal q is also examined, and it is shown that, under UK and US tax rules, the possibility of winding up precludes persistent undervaluation in equilibrium.

DOI

10.2307/2297738

Volume

52 (4)

Pages

665

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