Net Operating Loss Carryforwards and Corporate Savings Policies

Summary

The research explores the relationship between corporate cash holdings and tax net operating loss carryforwards (NOLs). It delves into how NOLs influence corporate savings decisions, challenging the traditional view that firms should distribute excess cash to shareholders to avoid the dual taxation impact on passive investment income. The study hypothesizes that NOLs, by reducing the corporate tax burden, alter this dynamic, encouraging firms to retain cash for investments on behalf of shareholders.