• ISSN: 2010-023X
    • Frequency: Bimonthly
    • DOI: 10.18178/IJTEF
    • Editor-in-Chief: Prof.Tung-Zong (Donald) Chang
    • Executive Editor: Ms. Cherry L. Chen
    • Abstracting/ Indexing: Engineering & Technology Digital Library, ProQuest, Crossref, Electronic Journals Library , EBSCO, and Ulrich's Periodicals Directory
    • E-mail: ijtef@ejournal.net
IJTEF 2014 Vol.5(3): 212-217 ISSN: 2010-023X
DOI: 10.7763/IJTEF.2014.V5.373

The Distributed Profit Based Corporate Taxation, and the Valuation of Cash Holdings

Priit Sander, Allan Teder, Karmen Viikmaa, and Mark Kantšukov
Abstract—The topic of corporate cash holdings has gained a lot of attention in academia recently. The current paper investigates the valuation of cash holdings under distributed profit-based corporate taxation. We show that the cash-to-assets ratio has increased considerably since the introduction of distributed profit-based taxation in Estonia. Almost 1/3 of all the companies in Estonia had cash-to-assets ratios above 50% in 2011. We argue that in order to value such cash holdings, a discount at a size of tax burden associated with profit distribution should be used both in case of cash as well as cash equivalents.

Index Terms—Cash holdings, company valuation, income taxation.

The authors are with the University of Tartu, Estonia (e-mail: priit.sander@ut.ee).

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Cite: Priit Sander, Allan Teder, Karmen Viikmaa, and Mark Kantšukov, "The Distributed Profit Based Corporate Taxation, and the Valuation of Cash Holdings," International Journal of Trade, Economics and Finance vol.5, no.3, pp. 212-217, 2014.

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