Tax shield

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Tax shield

The reduction in income taxes that results from taking an allowable deduction from taxable income.

Tax Shield

The reduction of one's taxable income as the result of a properly qualified deduction. Examples of tax shields include mortgage interest deductions, charitable donations, and others. The mortgage interest deduction is a particularly important tax shield to middle-class households because the value of their properties constitutes the greatest part of their net worths. Creating tax shields is also important to wealthy individuals to help them avoid as many taxes as possible.
References in periodicals archive ?
Other control variables include size, growth, profitability, tangibility, age, earnings variability, debt service capacity, dividend payout ratio, non-debt tax shields, degree of operating leverage, price-earnings ratio, promoter shareholdings, tax rate and uniqueness.
Capital structure determinants are except tax shields, profitability, size, assets tangibility, growth, signaling and cost of financial distress.
The empirical studies from US firms, such as that of Harris and Raviv [10], seem to suggest that "leverage increases with fixed assets, non-debt tax shields, investment opportunities and firm size and decreases with volatility, advertising expenditure, the probability of bankruptcy, profitability and uniqueness of the product.
DeAngelo and Masulis (1980) explain that non-debt tax shields work as a substitute for the tax benefits for debts.
The Honduran Congress approved a new mining law which eliminates tax shields for mining companies, reports Laprensa.
The novelty of the approach consisted in emphasising the role of the tax shields arising from debt financing.
Alexander Groh and Christoph Henseleit, from Barcelona and Munich, wrote The Valuation of Tax Shields Induced by Asset Step-ups in Corporate Acquisitions.
Analyzing the data, author has found that past profitability, non-debt tax shields and firm size are the strongest determinants of capital structure both in the short as well as long term.
We identify, the assumption that justifies the textbook approach of discounting interest tax shields at the cost of debt.
The value of tax shields depends on the debt policy of the company.
They have theoretically and empirically identified agency costs, information asymmetry, taxes, non-debt tax shields, growth, firm size, assets' collateral value and tangibility, profitability and liquidity, earnings variability, expected costs of financial distress, industry classification, country factor, and firm's international activities as the determinants of firm's debt-equity choices.
ISS Canada ignores that Bolivar has very significant tax shields going forward, which significantly depresses its valuation calculation.