This book illustrates the effects of business taxes on companies’ decisions, as well as tax competition, within a stochastic environment. The authors analyze how taxation influences firms’ decisions regarding investment, capital allocation, dividend distribution, and default time within a dynamic and risky framework. Specifically, the interest rate on debt and the value of a firm’s assets are both influenced by stochastic risk factors. Even if taxes are certain, their effects crucially depend on the risk faced by the firm, as well as on the incentives to evade and avoid them. While most of the literature studies these effects in a deterministic context, there is still a lack of fully stochastic and, at times, dynamic models. Recent global events have widely demonstrated that volatility and uncertainty are globally relevant phenomena.

The book is divided into two parts: the first part deals with a closed economy. In this context, the authors analyze investment, capital structure, dividend, and evasion decisions. In the second part, the book focuses on open economies, where tax competition plays a crucial role. Particularly, tax avoidance, profit shifting, and recent proposals such as the Global Minimum Tax are discussed.

Francesco Menoncin is Full Professor of Economic Policy at the University of Brescia (Italy). His research focuses on optimal portfolio in continuous time, financial markets, and derivatives. 

Paolo M. Panteghini is Full Professor at the University of Brescia (Italy). His main research area is corporate taxation. He is CESifo research fellow  and Member of the scientific advisory board of MATAX.