Report, News of 5 March 2012
Martin Simmler Receives Best Paper Award on the 5th RGS Doctoral Conference in Economics
On the 5th RGS Doctoral Conference in Economics of the Ruhr Graduate School in Economics Martin Simmler from DIW Berlin received the “Best Paper Award” for his work on “How Do Taxes Affect Investment When Firms Face Financial Constraints?” In this study, the author analyzes the effects of corporate income taxation on firms' investment in case of binding and non-binding financial constraints. In line with theory, the results show that the investment decision of firms facing no financial constraints depends only on the effective marginal tax rate. Contrary to that, the investment of firms which face financial constraints reacts more strongly to the effective average tax rate, which measures liquidity outflow through taxation, and less to the effective marginal tax rate as these firms are constrained by their financial situation.
Discussion Papers No 1181, Martin Simmler, How Do Taxes Affect Investment When Firms Face Financial Constraints?