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SUMMARY:Taxes and Equity Risk and Return: The case of Tax-Loss Carry Forwa
 rds - Ron Giammarino (University of British Columbia)
DTSTART:20230504T120000Z
DTEND:20230504T130000Z
UID:TALK175196@talks.cam.ac.uk
CONTACT:Daniel Simmons
DESCRIPTION:How do taxes affect equity risk and return? In this paper\, we
  examine the relationship between corporate taxes and equity risk and retu
 rn with a focus on tax-loss carry\nforwards. Tax-loss carry forward (TLCF)
 \, the accumulated corporate losses that can\nbe applied to future taxable
  income\, forms an important and risky corporate asset. We\nfirst show the
 oretically that a firm’s TLCF is a complex contingent claim that has a\n
 non-monotonic effect on equity risk: at a high level of TLCF\, equity risk
  is increasing\nin TLCF because firms are more likely to see their TLCF le
 ft deferred or unused after\nnegative cash flow shocks. On the other hand\
 , if TLCF is so low that it will be used\nwith near certainty\, then equit
 y risk is decreasing with TLCF since TLCF represents\na safe cash flow. Em
 pirically\, TLCF positively and significantly forecasts various measures o
 f equity risk\, as well as future returns controlling for standard risk me
 asures.\nThe positive relationship indicates that TLCF is risky for the ty
 pical firm.
LOCATION:CJBS\, room W201
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