Taxes and Corporate Investment in Japanese Manufacturing / Fumio Hayashi.

Format:

Book

Author/Creator:

Hayashi, Fumio.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1753.

NBER working paper series no. w1753

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1985.

Summary:

This paper examines the impact of taxes on the incentive to invest for the Japanese manufacturing sector in the postwar period. The idyosyricratic feature of the Japanese corporation tax system as compared to the U.S. is the prevelence of tax-free reserves and the tax deductibility of a part of taxes paid by corporations in the previous year. Our formula for the tax-adjusted Q and the cost of capital incorporates this. The main conclusions areas follows. While the postulated negative relation with the cost of capital cannot be found, investment in Japanese manufacturing shows until 1974 a strong association with the tax-adjusted Q. Since the change in stock prices, not taxes, is the primary source of changes in Q, the profitability of capitalis the major determinant of investment.

Notes:

Print version record

October 1985.