Research Interests


Solo-authored in  Journal of Corporate Finance, 2023, 79, 102380

Working Papers

This paper examines the corporate investment effect of a time limit on the use of net operating losses (NOLs). We predict that, when countries limit the use of NOLs to a few years instead of allowing indefinite use, managers of loss-making firms have an incentive to increase investments to recover these losses quickly. Using exogenous shocks to profitability from two earthquakes in Italy and variation in the tax treatment of NOLs over time, we find support for this prediction: When the use of NOLs is restricted in time (unrestricted), firms facing losses (do not) increase investment. This effect can be explained by timerestricted NOLs incentivizing firms to increase investments now to utilize NOLs before they expire. Moreover, this effect is more significant for firms with shorter investment horizons and in more profitable industries. We provide external validity for this finding using a large panel of firms from European Union countries exploiting variation in tax regimes. These results indicate that restricting loss offsets can increase investments of loss-making firms.

This paper examines the role of personal income taxes in multinationals’ corporate tax–induced profit shifting. As required in most OECD countries, firms need economic substance in low corporate–tax countries to justify profit shifting to these countries. Because high personal income taxes increase the cost of labor and thus the cost of providing economic substance, we predict that personal income taxes can mute corporate tax–induced profit shifting. Using data on personal and corporate income taxes from 26 European countries, we find that personal income taxes substantially reduce profit shifting to low corporate–tax countries. This effect is stronger if the parent country imposes strict economic substance requirements. We also provide empirical support that firms use employees to justify economic substance in low corporate–tax countries and that the effect of personal income taxes is related to the tax incidence of employees’ personal income tax partly falling on firms. Our results show important interactions between personal and corporate income taxes that substantially reduce multinationals’ profit-shifting activities when substance requirements are implemented as in the European Union or in many OECD countries. 

Tax Depreciation and Investment Decisions: Evidence from the Leasing Sector 

This paper examines the investment response of finance lease firms to a change in tax depreciation rules. Using an exogenous shock in Germany, our results suggest that finance lease companies, the only organisations affected by such a change, reduce their investments following the abolition of a beneficial and long-standing tax depreciation method. We provide evidence that the exposure of finance lease firms to regulatory requirements moderates the investment effect. Additional cross-sectional tests indicate a larger investment response for finance lease firms with a product portfolio specialised in mobile assets and, in particular, office and IT assets. Our findings add to the existing contributions on the effect of tax depreciation on investment decisions and to the limited literature looking into the effect of taxation on financial institutions.