8. Corporate Taxation, Inventory Undervaluation and Dividend Policy

Vesa Kanniainen and Seppo Honkapohja. CORPORATE TAXATION, INVENTORY UNDERVALUATION AND DIVIDEND POLICY. Raportteja ja artikkeleita 8. ISBN 051-9083-08-1. ISSN 0357-7384. In the corporate tax system, prevalent in Finland and in Sweden, the firms can create a tax-deductible allowance by using an appropriate undervaluation percentage. The aim of this allowance is to promote profitability by affecting the renst accruing to the owners of firms. The paper studies the interaction of employment, output, and financial decisions and dividend policy of a firm under this tax system.