Taxation and Corporate Investment: A q-Theory Approach

Abstract

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Time to build capital: Revisiting investment-cash-flow sensitivities

“…In implementing their approach the authors assume a time-to-build of one year thus closely corresponding to our assumptions. The magnitude of (convex) adjustment costs estimated by Barnett and Sakellaris (1999) and more recently by Cooper and Haltiwanger (2006) seem to be conforming much better to the q theory of investment compared to earlier estimates that produced implausibly large adjustment cost estimates (See for example, Hayashi (1982), or Summers (1981). 5…”

Policy Externalities and Banking Integration

“…I also contribute to the wider literature on the effects of corporate taxation: see e.g., Summers (1981), Cummins, Hassett and Hubbard (1996), Auerbach, Hines andSlemrod (2007), Djankov et al (2010), Suárez Serrato and Zidar (2015), Ljungqvist and Smolyansky (2015). By focusing on taxes imposed on banks, I bring attention to a previously overlooked consequence of jurisdictional tax competition.…”

General Equilibrium Analysis

“…This model is a simplified version of the framework used in Summers' (1981) analysis of the tax returns and corporate investment, and Poterba's (1981) analysis of the effects of inflation on the price of owner occupied housing.…”

“…Firms maximize this value subject to the capital accumulation condition (12). A detailed discussion of the solution to this sort of problem is provided in Summers (1981). If the production technology exhibits constant returns to scale and the adjustment cost function is homogenous of degree zero in I/K, then optimal investment is a function of Q, or tax-adjusted q.…”