Tax Status and Tax Response Heterogeneity of Multinationals' Debt Finance
Michael Overesch and
Authors registered in the RePEc Author Service: Thiess Büttner ()
FinanzArchiv: Public Finance Analysis, 2011, vol. 67, issue 2, 103-122
This paper analyzes how corporate taxation affects the capital structure of subsidiaries of multinational companies. The emphasis is on firm characteristics that proxy for the tax status of a subsidiary, which is crucial for the tax responsiveness of firms. Based on a comprehensive panel of German multinationals, we find that the tax sensitivity of the capital structure is significantly affected by several firm characteristics. Our results imply that well-known non-debttax shields such as depreciation allowances and loss carryforwards reduce the tax sensitivity of the debt-to-capital ratio. We also find that a higher probability of experiencing losses reduces the tax-rate sensitivity of debt financing.
Keywords: non-debttax shields; corporate taxation; debt finance; firm-level data (search for similar items in EconPapers)
JEL-codes: H25 G32 (search for similar items in EconPapers)
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Persistent link: http://EconPapers.repec.org/RePEc:mhr:finarc:urn:sici:0015-2218(291106)67:2_103:tsatrh_2.0.tx_2-8
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