The impact of tax shields on bankruptcy risk and resource allocation
研究了欧洲29国数据，发现更严格的税收亏损结转限制会显著增加企业破产概率，因为降低了亏损的税收价值，但宽松限制可能维持低效企业存活，影响资源配置效率。
Abstract This paper investigates how tax loss carryforward (LCF) rules influence corporate bankruptcies and market-wide productivity. Analyzing data from 29 European countries, I find that stricter LCF deductibility limits significantly increase bankruptcy likelihoods. This is because stricter LCF deductibility limits lower the present value of net operating losses (NOLs) as tax assets, reducing the incentive to keep struggling firms alive. This effect is especially pronounced for business group firms, which can support struggling affiliates through internal capital markets to strategically exploit NOLs. My results suggest that lenient LCF deductibility limits can sustain unproductive firms, impacting market-wide resource allocation and productivity. These findings highlight the trade-off in tax policy between supporting firm survival and ensuring efficient resource allocation.