An Empirical Study of the Impact of Corporate Taxation on the Debt Policy of Canadian Firms

Jan Bartholdy, Gordon R. Fisher and Jack Mintz

Working Paper from Economics Department, Queen's University

Abstract: This paper discusses the influence of Canadian corporate tax rates on the debt-asset ratios of Canadian firms, 1970-82. Five theoretical models are reviewed and used to construct a linear encompassing model of financial structure. Empirical evidence from Canadian firms from COMPUSTAT files supports the tax loss, bankruptcy cost, managerial incentive and adverse selection models and rejects the Miller model. The most novel and significant finding is that corporate tax rates have a strong, positive, and stable effect on debt-asset ratios.

Keywords: enterprises; taxes; economic models; empirical methods (search for similar items in EconPapers)
Pages: 42 pages
Date: 1989
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:742

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