Work

Taxes, Financing Decisions, and Firm Value

Year: 1998

Type: article

Abstract: We use cross‐sectional regressions to study how a firm's value is related to dividends and debt. With a good control for profitability, the regressions can measure how the taxation of dividends and debt affects firm value. Simple tax hypotheses say that value is negatively related to dividends and positively related to debt. We find the opposite. We infer that dividends and debt convey information about profitability (expected net cash flows) missed by a wide range of control variables. This information about profitability obscures any tax effects of financing decisions.

Source: The Journal of Finance

DOI: 10.1111/0022-1082.00036

Authors: Eugene F. Fama, Kenneth R. French

Institutions: University of Chicago, Yale University

Language: English

Topic: Corporate Finance and Governance

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W3123906439

FWCI: 21.56

Cites: 53

Cited by: 1,057

Related to: 10