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Article: Capital gains tax: Implications for the firm's cost of capital, share valuation and investment decision-making
- Article from:
- Accounting and Business Research
- Article date:
- April 1, 1998
- Author:
CopyrightCopyright Institute of Chartered Accountants in England and Wales Spring 1998. Provided by ProQuest LLC. (Hide copyright information)
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Mike Dempsey*
Abstract-The traditional `single-period' equity valuation models assume that investors' capital gains tax liabilities can be represented as occurring annually, independently of whether or not the share is actually sold. The assumption implies that investors sell their shares on an annual basis. The essential issue as to how capital gains tax might be expected to impact on the holding decisions of shareholders, along with the likely responses of their firms, is forestalled by these models. More realistic assumptions for the imposition of capital gains tax have only recently been presented in the literature. This paper, with resource to the implications of these contributions, ...