Taxes do affect corporate financing decisions: The case of Belgian ACE
In this paper, I use difference-in-differences regressions to measure how the debt tax shield affects the capital structure of a company. By comparing the financial leverage of treatment and control companies before and after the introduction of an equity tax shield, I infer the impact of the tax discrimination between debt and equity. Consistent with the theoretical prediction, the estimated results show that the introduction of an equity tax shield has a significant negative effect on the financial leverage of a company. This effect amounts to approximately 2-7%, meaning that a classical tax... Mehr ...
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Dokumenttyp: | doc-type:workingPaper |
Erscheinungsdatum: | 2012 |
Verlag/Hrsg.: |
Munich: Center for Economic Studies and ifo Institute (CESifo)
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Schlagwörter: | ddc:330 / G30 / H25 / K34 / allowance for corporate equity / corporate financing decisions / Kapitalstruktur / Entscheidung / Unternehmensbesteuerung / Eigenkapital / Steuerliches Anrechnungsverfahren / Steuerwirkung / Belgien |
Sprache: | Englisch |
Permalink: | https://search.fid-benelux.de/Record/base-26543653 |
Datenquelle: | BASE; Originalkatalog |
Powered By: | BASE |
Link(s) : | http://hdl.handle.net/10419/55334 |
In this paper, I use difference-in-differences regressions to measure how the debt tax shield affects the capital structure of a company. By comparing the financial leverage of treatment and control companies before and after the introduction of an equity tax shield, I infer the impact of the tax discrimination between debt and equity. Consistent with the theoretical prediction, the estimated results show that the introduction of an equity tax shield has a significant negative effect on the financial leverage of a company. This effect amounts to approximately 2-7%, meaning that a classical tax system encourages companies to use on average 2-7% more debt than when there is an equal tax treatment of debt and equity.