• Initiative -
  • Type KAPSARC journal article
  • Date 1 September 2013


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.


Applied Financial Economics


Axel Pierru

Acting Vice President/ Program Director Axel Pierru received his Ph.D. in economics from University Paris 1 Pantheon-Sorbonne (France). He also holds an HDR degree, which… Axel Pierru received his Ph.D. in economics from University Paris 1 Pantheon-Sorbonne (France). He also holds an HDR degree, which is a French accreditation to supervise research. In 2007, Dr. Pierru was appointed Chevalier dans l’Ordre des Palmes Académiques (knighthood award in the academic field) by the French Ministry for National Education. In 2011 Dr. Pierru joined KAPSARC in Saudi Arabia, after spending 15 years at IFP Energies Nouvelles (France) where he led research, consulting and training projects and taught energy economics and finance to postgraduate students. Dr. Pierru has served in various leadership positions at KAPSARC, including as interim Vice President for Research. Since 2014 he has been a program director, and currently he leads the Energy Macro & Micro-economics Program. He is also Acting Vice President, Knowledge & Analysis. He undertakes applied research that combines methodological innovation with practical relevance for policymaking. His expertise covers oil market and pricing, energy economics, policy, finance and modeling, and oil-exporting economies. Dr. Pierru has a proven track record of methodological innovations with 50 journal papers to his name. He has been a key contributor to the development of novel lines of research, such as the role of OPEC in stabilizing the oil market, the economic modeling of price controls, or the evaluation of investment projects by international oil companies facing various tax systems. He also coauthored with Denis Babusiaux the book Corporate Investment Decisions and Economic Analysis: Exercises and Case Studies (2005), which is the fruit of years of teaching, consulting and research, and contains numerous examples from the oil and gas sector.


  • Energy modelling
  • Energy economics
  • Energy policy
  • Oil pricing and finance

Publications See all Axel Pierru’s publications

Tarek Atalla

Tarek Atalla

Former Research Associate

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