nep-cfn New Economics Papers
on Corporate Finance
Issue of 2014‒12‒13
two papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Can tax policy co-cause the crisis? By Szarowska, Irena
  2. Don’t Hide Your Light Under a Bushel: Innovative Originality and Stock Returns By Hirshleifer, David; hsu, po-hsuan; li, dongmei

  1. By: Szarowska, Irena
    Abstract: Although taxes have not generated the crisis, some aspects of tax policy may have led to increased risk-taking and indebtedness of banks, households and companies. Tax incentives may indeed the behavior of economic agents, leading them to wrong economic decisions. The aim of the paper is to review main channels through which the tax policy can affect financial markets and financial stability. Attention is focused on last and current development of tax reliefs for housing and capital gains, tax benefits for corporate debt financing and taxation of financial institutions Conventional scientific methods such as analysis, induction, comparison and synthesis are used in the paper.
    Keywords: crisis; corporate debt financing; housing; taxation of financial institutions
    JEL: G1 G10 G20 G3 H2
    Date: 2013
  2. By: Hirshleifer, David; hsu, po-hsuan; li, dongmei
    Abstract: We propose that owing to limited investor attention and skepticism of complexity, firms with greater innovative originality (IO) will be undervalued, especially for firms with higher valuation uncertainty, lower attention, and greater sensitivity of future profitability to IO. We find that IO strongly positively predicts firms’ profitability and abnormal stock returns, especially among those firms suggested by the model. The return predictive power of IO is robust to extensive asset pricing controls, to an alternative IO measure, and across sample periods. Although we do not rule out risk-based explanations, the most plausible interpretation of the evidence is that the market undervalues IO.
    Keywords: Limited attention, Market efficiency, Processing fluency, Innovative originality, Complexity, Ambiguity aversion
    JEL: G1 G11 G12 G14 O3 O32
    Date: 2014–10

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