What is an “identification problem”? Illustrate conditions under which there might be an identification problem involving: employee– employer compensation contracting; sale of an asset; a merger. Why is it important for outsiders to recognize when an identification problem may be present?
Answer to relevant QuestionsIf employers are risk neutral and employees are risk averse, why is a salary contract optimal, ignoring tax and asymmetric information considerations? Under what conditions in employee compensation contracting are tax and ...How might tax considerations conflict with financial reporting considerations? Provide an example from the banking industry. A tax planner for a start up biotechnology company is advising her client about how to efficiently organize R& D activities. One suggestion the tax planner made is to form a joint venture with another biotech company. List ...How is the marginal tax rate affected by the presence of rules that reduce current tax deductions by a fraction of incremental income? How is the marginal tax rate affected by the presence of rules that postpone current tax ...Suppose a firm has a tax loss of $5 million in the current period. The firm’s after-tax discount rate is 10%. Over the preceding 5 years the firm has reported the following taxable income: a. If the carryback period is 3 ...
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