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Tax Status and Tax Response Heterogeneity of Multinationals' Debt Finance

Thiess Buettner, Michael Overesch and Georg Wamser
Authors registered in the RePEc Author Service: Thiess Büttner ()

FinanzArchiv: Public Finance Analysis, 2011, vol. 67, issue 2, 103-122

Abstract: 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)
Date: 2011
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