EconPapers    
Economics at your fingertips  
 

Firm Financing in Chile After the 2014-2015 Tax Reform: Debt of Equity?

Leonardo Hernández T. ()
Additional contact information
Leonardo Hernández T.: The World Bank

Revista de Analisis Economico – Economic Analysis Review, 2016, vol. 31, issue 2, 65-100

Abstract: This paper analyzes the effects of the 2014-2015 Chilean tax reform on firms' valuation and incentives to retain earnings and finance their operations with equity versus debt. By analyzing the effects of the reform on total taxes paid and cash flows received by investors, the paper concludes that in general the reform reduces the value of firms and lessens the incentives to retain earnings. Also, simulations show that the majority of firms would choose the accrual or "attributed" tax based system. However, if the latter is not permitted firms will choose debt over equity. The cash-based or semi-integrated system becomes the preferred option only when tax avoidance is possible.

Keywords: Corporate tax; income tax; payout ratio; tax avoidance; firm financing (search for similar items in EconPapers)
JEL-codes: D92 G32 G35 H24 H26 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.rae-ear.org/index.php/rae/article/view/498

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ila:anaeco:v:31:y:2016:i:2:p:65-100

Ordering information: This journal article can be ordered from

Access Statistics for this article

Revista de Analisis Economico – Economic Analysis Review is currently edited by Carlos Ponce

More articles in Revista de Analisis Economico – Economic Analysis Review from Universidad Alberto Hurtado/School of Economics and Business Contact information at EDIRC.
Bibliographic data for series maintained by Mauricio Tejada ().

 
Page updated 2020-12-02
Handle: RePEc:ila:anaeco:v:31:y:2016:i:2:p:65-100