Abstract: The public and private sector costs of capital differ in the presence of taxes, because taxes are a cost to the private but not the public sector. We use a quasi-arbitrage approach to show how to include taxes in a comparison of capital costs. We find that taxes induce distortions that generate a systematic private sector preference for assets with rapid tax depreciation, high debt capacity, and low risk. We examine the implications of that preference for privatization, government outsourcing, and regulation. Our approach facilitates the analysis of transactions such as pure risk transfers, otherwise difficult using standard discounting methods.
Michel Habib is Professor of Finance at the University of Zurich and member of the Swiss Finance Institute. His research interests are corporate finance and the theory of the firm. His research has appeared in a number of academic and practitioner publications, such as the Journal of Business, the Journal of the European Economic Association, the Journal of Finance, the Journal of Financial Intermediation, the Journal of Mathematical Economics, Management Science, the Review of Corporate Finance Studies, the Review of Financial Studies, and the Journal of Applied Corporate Finance. He was director of NCCR FINRISK and is Research Fellow at the Center for Economic Policy Research and the Wharton Financial Institutions Center. He is a graduate of McGill University and the Wharton School of the University of Pennsylvania and was Associate Professor of Finance at the London Business School prior to joining the University of Zurich.
Time and Place: March 7, 2019, 16:15,
University of Piraeus, 80 Karaoli & Dimitriou Str., Piraeus,
More Upcoming Seminars in 2019:
March 21, 2019: Rafael Zambrana, Nova School of Business and Economics
April 4, 2019: Marcin Kacperczyk, Imperial College London
All Finance Seminars