EconPapers    
Economics at your fingertips  
 

Capital Structure and International Debt Shifting

Luc Laeven (), Harry Huizinga and Gaëtan Nicodème ()

No 07/39, IMF Working Papers from International Monetary Fund

Abstract: This paper presents a model of a multinational firm's optimal debt policy that incorporates international taxation factors. The model yields the prediction that a multinational firm's indebtedness in a country depends on a weighted average of national tax rates and differences between national and foreign tax rates. These differences matter because multinationals have an incentive to shift debt to high-tax countries. The predictions of the model are tested using a novel firm-level dataset for European multinationals and their subsidiaries, combined with newly collected data on the international tax treatment of dividend and interest streams. Our empirical results show that corporate debt policy indeed not only reflects domestic corporate tax rates but also differences in international tax systems. These findings contribute to our understanding of how corporate debt policy is set in an international context.

New Economics Papers: this item is included in nep-acc, nep-fmk and nep-pbe
Date: 2007-02-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (80) Track citations by RSS feed

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=20074 (application/pdf)

Related works:
Journal Article: Capital structure and international debt shifting (2008) Downloads
Working Paper: Capital Structure and International Debt Shifting (2007) Downloads
Working Paper: Capital Structure and International Debt Shifting (2006) Downloads
Working Paper: Capital structure and international debt shifting (2006) Downloads
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:imf:imfwpa:07/39

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Jim Beardow ().

 
Page updated 2019-05-25
Handle: RePEc:imf:imfwpa:07/39