Open AccessImpact Of The Repeal Of The Investment Tax Credit ON Firms Investment Decisions
Author(s) -
Steven Carlson,
Chenchuramaiah T. Bathala
Publication year - 2011
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.149
H-Index - 22
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v10i2.5936
Subject(s) - repeal , investment (military) , monetary economics , economics , tax credit , return on investment , business , labour economics , macroeconomics , public economics , production (economics) , politics , political science , law
This study investigates the relationship between the 1986 repeal of the investment tax credit (ITC) and firms capital investment rates using an ANCOVA model that includes firm size and growth rate variables as covariates. Our results demonstrate: (1) there is a significant decline in firms investment rates between the pre-Tax Reform Act (TRA) and post-TRA periods; and (2) holding the amount of ITC available to firms constant during the two time periods, firms investment rates remain relatively constant. We conclude that ITC is an important determinant in firms capital investment rates.