|
The purpose of this study is to investigate whether the tax
preferential treatment "Shareholders'' investment tax credit"
can help companies raise capital in their seasoned stock
issues. This study also analyses the alternative of
shareholders'' investment tax credit or 5 years tax holiday. The
empirical tests are based on the hypothesis that if investors
take the shareholders'' investment tax credit into consideration
when they price the seasoned stock issues, the price of the ex-
rights shares will drop because of the disappearance of the tax
benefits after the issue. This study examines 17 listed firms
which are specified as "Major Technology Firms" or "Major
Investment Projects" under ROC''s Statute for Industrial
Upgrading The results are compared to those of other 259
companies which the preferential tax treatments do not apply.
The empirical results show that the price of ex-rights shares
do drop after the issue, but the effects are not significant.
Also, the drop is not significantly related to the hypothetical
tax benefit. Overall, these evidences are weak to support the
notion. We can not conclude that investors take the tax
benefits into consideration upon pricing seasoned stocks
issues. This study also suggests that, as to individual
investors, if a investment project has a net present value
under 1.08 times the investment amount, shareholders''investment
tax credit is superior to the 5 years tax holiday; however, as
to entity investors, if a investment project''s net present
value is above 5.08 times the investment amount, 5 years tax
holiday will be better.
|