International Debt Shifting: The Value Maximizing Mix of Internal and External Debt

Jarle Møen, Dirk Schindler, Guttorm Schjelderup and Julia Tropina Bakke ()
Additional contact information
Julia Tropina Bakke: SNF - Centre for Applied Research at NHH, Postal: SNF, Helleveien 30, N-5045 Bergen, Norway

No 2019/1, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science

Abstract: We study the capital structure of multinationals and expand previous theory by incorporating international debt tax shield effects from both internal and external capital markets. We show that: (i) multinationals' firm value is maximized if both internal and external debt are used to save tax; (ii) the use of internal and external debt is independent of each other; (iii) multinationals have a tax advantage over domestic firms, which cannot shift debt across international borders. We test our model using a large panel of German multinationals and find that internal and external debt shifting are of about equal importance.

Keywords: Corporate taxation; multinationals; capital structure; international debt-shifting; tax avoidance (search for similar items in EconPapers)
JEL-codes: F23 G32 H25 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2019-03-29
New Economics Papers: this item is included in nep-acc and nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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http://hdl.handle.net/11250/2592998 Full text (application/pdf)

Related works:
Journal Article: International Debt Shifting: The Value-Maximizing Mix of Internal and External Debt (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:nhhfms:2019_001

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