Taxes do Affect Corporate Financing Decisions: The Case of Belgian ACE

Savina Princen

No 3713, CESifo Working Paper Series from CESifo

Abstract: In this paper, I use difference-in-differences regressions to measure how the debt tax shield affects the capital structure of a company. By comparing the financial leverage of treatment and control companies before and after the introduction of an equity tax shield, I infer the impact of the tax discrimination between debt and equity. Consistent with the theoretical prediction, the estimated results show that the introduction of an equity tax shield has a significant negative effect on the financial leverage of a company. This effect amounts to approximately 2-7%, meaning that a classical tax system encourages companies to use on average 2-7% more debt than when there is an equal tax treatment of debt and equity.

Keywords: allowance for corporate equity; corporate financing decisions (search for similar items in EconPapers)
JEL-codes: G30 H25 K34 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp3713.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 503 Service Unavailable

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:ces:ceswps:_3713

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().