Value and capacity of tax shields: An analysis of the slicing approach

Research output: Contribution to journalArticlepeer-review

10 Scopus citations


Correctly valuing tax shields has been a challenge in corporate valuation. A recent study by Liu (2009) introduces the slicing approach to separating the tax shield into the earned and unearned parts. Liu also shows that the MM results are wrong, and claims that the slicing approach has finally resolved the issue of pricing tax shields, thereby bringing closure to the topic. However, through careful analysis, we refute Liu's main claims and restore the MM results. There are still open questions and the topic is not completely resolved as claimed in Liu (2009).

Original languageEnglish (US)
Pages (from-to)166-173
Number of pages8
JournalJournal of Banking and Finance
Issue number1
StatePublished - Jan 2011
Externally publishedYes


  • Capital structure
  • Discount rate
  • Tax shields

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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