On the Capital Structure of Foreign Subsidiaries: Evidence from a Panel Data Quantile Regression Model
Raffaele Miniaci and
No 9085, CESifo Working Paper Series from CESifo
This paper studies how variations in tax rates and profitability affect the (unconditional) quantiles of the distribution of the leverage of European foreign owned subsidiaries in the presence of unobserved company characteristics, possibly correlated with their observable dimensions. To achieve our goal, we suggest how to apply Firpo et al. (2009) approach to the estimation of unconditional quantile partial effects in a model with correlated random effects. The results show that the impact of taxes and profitability on subsidiaries’ financial choices varies across different quantiles of the (skewed) distribution of leverage. In particular, when the leverage ratio is low enough, an increase in a subsidiary’s tax rate stimulates its borrowing. When however, the leverage ratio is high enough, taxes do not matter. We also find that the parent company’s tax rate has a positive impact on a subsidiary’s leverage ratio only if its starting leverage ratio is low enough. Finally, profitability (proxied by ROA) has either a negative or null impact, depending on the leverage ratio and the tax rate used (namely, statutory or effective marginal tax rates).
Keywords: panel data; quantile regression; corporate finance (search for similar items in EconPapers)
JEL-codes: C21 C23 G32 H25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9085
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 ().