The Impact of Personal and Corporate Taxation on Capital Structure Choices
Michael Overesch and
FinanzArchiv: Public Finance Analysis, 2010, vol. 66, issue 3, pages 263-294
This paper empirically analyzes whether both personal and corporate taxation have an influence on companies´ capital structure decisions. We investigate the effect of the difference in taxation of debt and equity financing on capital structure. Our empirical results, based on a panel of European firm-level data, suggest that a higher tax benefit of debt has the expected significant positive effect on a company´s financial leverage. We find evidence that the capital structures of smaller companies respond more heavily to changes in the tax benefit of debt. Additional analysis confirms that, in particular, variation in capital income tax rates at the shareholder level implicates significant capital structure adjustments. Moreover, we find substitutive relationships between non-debt tax shields and the effect of the corporate tax rate on capital structure.
Keywords: capital structure; corporate income tax; personal income tax; firm-level data (search for similar items in EconPapers)
JEL-codes: G30 G32 H24 H25 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (9) Track citations by RSS feed
Downloads: (external link)
Fulltext access is included for subscribers to the printed version.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:mhr:finarc:urn:sici:0015-2218(201009)66:3_263:tiopac_2.0.tx_2-x
Ordering information: This journal article can be ordered from
Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Access Statistics for this article
FinanzArchiv: Public Finance Analysis is currently edited by Alfons Weichenrieder, Ronnie Schöb and Katherine Cuff
More articles in FinanzArchiv: Public Finance Analysis from Mohr Siebeck, Tübingen
Series data maintained by Thomas Wolpert ().