Empirical evaluation of interest barrier effects

Daniel Dreßler and Uwe Scheuering

ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: This paper empirically estimates the effects of a new thin-capitalization rule on the financing behavior of German corporations employing a fixed effects difference-in-difference approach. We compare treatment and control groups separated by a hypothetical application of the new rule in three years before its introduction. Our analysis does not provide empirical evidence for a pure interest barrier effect. This indicates that the few affected firms were either unable to reduce their leverage or used exceptions. The observable trend towards less debt might stem from a general preference for lower debt ratios after the crisis or from the tax rate cut, which was introduced simultaneously.

Keywords: Capital Structure; Corporate Taxation; Interest Barrier; Empirical Analysis; Firm-Level Data (search for similar items in EconPapers)
JEL-codes: F23 H25 H32 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-cse
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Empirical evaluation of interest barrier effects (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:12046r

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