Taxes,risky investments,and the simultaneous choice of organizational form and financing |
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Authors: | Kay Blaufus Britta Mantei |
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Institution: | 1. Wirtschaftswissenschaftliche Fakult?t, Leibniz Universit?t Hannover, K?nigsworther Platz 1, 30167, Hannover, Germany
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Abstract: | By taking explicit account of liability limitations, we analyse the influence of taxes on the simultaneous choice of organizational form and financing. In a two-state model for a single reporting period investors striving for maximisation of expected utility choose the organizational form (with or without liability limitation) in which they implement a given risky real investment and decide how they finance it (equity or debt). We demonstrate that liability limitations result in tax-relevant differences between organizational forms. Thus, for example, the tax bases differ in relation to the chosen liability-contingent debt capital compensations as well as to tax loss offset rules. Therefore, even in the event of identical tax rates, taxes can influence the decision regarding the organizational form. |
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