Review of Economic Studies Vol. 52 No. 4 1985
Taxes, Investment and Q
Abstract
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
- Issue
- 4
- Pages
- 665
- Sources
- openalex crossref