Corporate governance, taxes and real investment in non-financial firms
An agent-based approach
N.C.T. van Berkel (TU Delft - Technology, Policy and Management)
H.H. Hansen – Mentor (TU Delft - Energy and Industry)
Servaas Storm – Graduation committee member (TU Delft - Economics of Technology and Innovation)
Martijn Warnier – Coach (TU Delft - System Engineering)
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Abstract
Real investment within non-financial corporations has been steadily decreasing in the last fifty years, as increased payout to shareholders is seen as one of the main causes . Chetty & Saez (2006) argue that taxes on profits, dividend payout and capital gain also have a negative impact on payout, and thus real investment in non-financial firms. However, it is unknown if corporate governance can explain this relationship between taxes and real investment. An agent-based financial market was built to research which types of corporate governance can explain the effect of taxes on the real investment rate. The results show that a corporate governance based on maximizing shareholder value and minimizing interest payments can explain the effect of taxes on the real investment rate. To further define the effect of corporate governance on the real investment rate, an agent-based macroeconomic model can be built that would incorporate more feedback loops of investment and payout and endogenous growth of earnings of firms.