Taxes and Corporate Risk Taking

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Type and Duration

FFF-Förderprojekt, September 2016 until August 2018 (finished)


Chair for Tax Management and the Laws of Liechtenstein and International Taxation

Main Research

Wealth Management

Field of Research

Wealth Planning


In every investment decision the investor must weigh the advantage of a greater return against the disadvantage of a possible loss or risk. Previous findings from Domar and Musgrave (1944) show that a proportional tax with full loss offset increases risk taking. If taxation lowers the yield and the risk of every asset in the same proportion, the market risk-yield rate is unchanged and results in increased demand by investors for higher yielding and more risky assets.

The aim of this research project is to explore the impact of an allowance for corporate equity (ACE) on corporate risk taking. Although the advantages of an ACE are widely discussed in economic literature, relatively little attention has been paid to the interplay of ACE systems and corporate risk-taking.

Corporate risk-taking is fundamental to firm performance and survival. In this research project, we examine whether and how the combination of various tax systems, tax rates and loss-carry forward rules influences corporate risk-taking.

Reference to Liechtenstein

As the research proposal aims on the economic impact of an ACE - which is a cornerstone of the Liechtenstein tax system - the research project provides knowledge for socially and economically relevant challenges through research achievements. The research project will be carried out in collaboration with the Organisation for Economic Co-operation and Development (OECD).

Project Manager


  • Forschungsförderungsfonds der Universität Liechtenstein



  • Kirn, T. (2017). How did behavioural responses after the introduction of an ACE affect the cost of capital?. Paper presented at the 79. Wissenschaftliche Jahrestagung des Verbandes der Hochschullehrer für Betriebswirtschaft (VHB), Universität St. Gallen (HSG).

  • Kirn, T. (2017). Paper presented at the 2017 Annual Congress of the Swiss Society of Economics and Statistics (SSES), Université de Lausanne (UNIL).