International Debt Shifting: The Value Maximizing Mix of Internal and External Debt
Jarle Møen (),
Dirk Schindler (),
Guttorm Schjelderup () and
Julia Tropina Bakke ()
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Julia Tropina Bakke: SNF - Centre for Applied Research at NHH, Postal: SNF, Helleveien 30, N-5045 Bergen, Norway
No 2019/1, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science
We study the capital structure of multinationals and expand previous theory by incorporating international debt tax shield effects from both internal and external capital markets. We show that: (i) multinationals' firm value is maximized if both internal and external debt are used to save tax; (ii) the use of internal and external debt is independent of each other; (iii) multinationals have a tax advantage over domestic firms, which cannot shift debt across international borders. We test our model using a large panel of German multinationals and find that internal and external debt shifting are of about equal importance.
Keywords: Corporate taxation; multinationals; capital structure; international debt-shifting; tax avoidance (search for similar items in EconPapers)
JEL-codes: F23 G32 H25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc and nep-cfn
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:nhhfms:2019_001
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