We consider a multinational firm that seeks to maximize its total amount of interest tax shield while following a constant debt ratio policy on a global level. The firm’s total interest tax shield can then be considered as a piecewise-linear increasing function that is concave with respect to the firm’s value. As a result, the expected interest tax shield can be much safer than the firm’s free cash flow, depending on the firm’s current value. With a simple no-arbitrage model, we derive the discount factor to apply to the total interest tax shield expected by the multinational firm. We show that this formula generalizes standard results of the literature on interest tax shields valuation. © 2013 Copyright Taylor and Francis Group, LLC.
Program Director Axel is the director of KAPSARC’s Energy and Macroeconomics program. From October 2018 to March 2019, he was KAPSARC’s interim… Axel is the director of KAPSARC's Energy and Macroeconomics program. From October 2018 to March 2019, he was KAPSARC's interim vice president of research. Axel joined KAPSARC in 2011, after spending 15 years at IFP Energies Nouvelles in France, where he led research, consulting and training projects. Axel received his Ph.D. in economics from the Pantheon-Sorbonne University in Paris. He undertakes applied research that combines methodological innovation with practical relevance for policymaking. His research is focused on energy economics, policy, finance, oil pricing, and energy-exporting economies. Axel has been published extensively, with over 40 peer-reviewed journal papers to his name.
- Energy modelling
- Energy economics
- Energy policy
- Oil pricing and finance
Publications See all Axel Pierru’s publications
Hard-linking a Top-down Economic Model with a Bottom-up Energy System for an Oil-exporting Country with Price Controls
We consider a multinational firm that seeks to maximize its total amount of interest tax…7th January 2023
We consider a multinational firm that seeks to maximize its total amount of interest tax…15th November 2022