The effect of tax regulation on firm value: the Turkish case of Allowance for Corporate Equity (ACE) regulation

Ozdamar M., Tanyeri B., Akdeniz L.

Applied Economics Letters, cilt.28, sa.4, ss.264-268, 2021 (SSCI) identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 28 Sayı: 4
  • Basım Tarihi: 2021
  • Doi Numarası: 10.1080/13504851.2020.1751797
  • Dergi Adı: Applied Economics Letters
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus, IBZ Online, International Bibliography of Social Sciences, ABI/INFORM, Business Source Elite, Business Source Premier, CAB Abstracts, EconLit, Geobase, Public Affairs Index, Veterinary Science Database, DIALNET
  • Sayfa Sayıları: ss.264-268
  • Anahtar Kelimeler: Allowance for corporate equity, event study, tax regulation, tax shield for equity
  • TED Üniversitesi Adresli: Evet

Özet

Investors ex-ante price the tax shield that Turkish firms would enjoy and react positively to the introduction of a legislation that provides a deduction for new equity issues. Not all firms are equally affected by the equity tax shield. Cumulative abnormal returns prove significantly higher for levered firms who may find it easier to switch from debt to equity financing and for firms that have income to shield from tax. Furthermore, the most levered firms and the firms with the highest income, whom investors ex-ante expect to benefit most from the regulation, do indeed issue more equity to take advantage of the tax benefits of the new regulation.