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June 15, 2026Journal of the American Taxation Association

LIFO Adoption and the Tax Shield Substitution Effect.

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Authors

RTRobert TrezevantUniversity of Southern California

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Implication

Randomized trial investigates the impact of LIFO adoption on tax shields in firms, indicating financial strategy implications.

Key Points

  • This research examines how adopting LIFO affects firms' cost of goods sold and interest expenses post-adoption.
  • Analyzed data from firms that adopted LIFO in 1974
  • Compared changes in cost of goods sold and interest expenses before and after LIFO adoption
  • Evaluated the impact on firms retaining FIFO
  • Firms adopting LIFO showed a negative correlation between changes in cost of goods sold and interest expense
  • No such relationship existed for firms using FIFO
  • Indicates interdependence of capital structure and inventory accounting choices

Cite This Study

Robert Trezevant (1996) studied this question.

synapsesocial.com/papers/6a2f97e8a1cfeec490828fadhttps://doi.org/10.2308/jata-6144602
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