Capital gains tax: implications for the firms's cost of capital, share valuation and investment decision-making

Article Abstract:

New models indicate the likely effect of high levels of capital gains taxation. Traditional models treat investors' capital gains liabilities as an annual occurrence based on share-selling behaviour having an annual pattern. This assumption would be valid in circumstances where capital gains tax is lower than dividend tax. More realistic models relate share selling behaviour to capital gains tax levels. These indicate that it is very likely that higher levels of capital gains tax would have little effect on government revenue but would significantly disrupt the capital markets.

Public Finance Activities, Capital Gains Taxes, Stockholders, Investments, Capital gains tax

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Inflation, taxation and the valuation of shares

Article Abstract:

Financial modelling research has generally not looked at share valuation models where the shareholding period is greater than one year. Recent research has addressed this issue, and has also looked at taking account of income taxes, indexation for inflation and capital gains taxes paid on realised gains. It was possible to develop a share valuation model for an infinite dividend series, with the share price being expressed in terms including the growth rate in dividends, the after-tax riskless rate and the shareholder tax credit.

Stocks & Other Equity Securities, Corporations, Stock price forecasting

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Empirical Valuation Models: How Useful Have They Been?

Article Abstract:

For about thirty years, research on share valuation modeling has proliferated. The dividend approach to valuation was generally preferred over the earnings approach. This research indicates that research on share valuation neither confirms nor denies the theory of alternative valuation. An analysis of the lack of specificity in valuation modeling is highlighted.

Research, Finance, Accounting, Dividends

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