Taxes and Corporate Debt Policy in Canada: An Empirical Investigation
AbstractThis paper explores the implications of asymmetric corporate taxes for firms' debt policy. The focus is on the effects of two dynamic tax provisions, loss carry-forward and loss carry-back, on net debt issues. An effective tax variable is first estimated using a Tobit framework, accounting for the fact that firms' losses for tax purposes are censored. This effective tax variable and other explanatory factors are employed to explain net debt issues. Heteroskedasticity caused by the 'firm size effect' is also corrected. Using a panel of 128 firms between 1979 and 1989, this paper finds that corporate taxes have significant effects on firms' debt policy.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 29 (1996)
Issue (Month): 3 (August)
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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
Web page: http://economics.ca/cje/
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- Sinha, Pankaj & Bansal, Vishakha, 2013. "Capital structure puzzle: the interrelationship between leverage, taxes and other micro economic factors," MPRA Paper 49878, University Library of Munich, Germany, revised 17 Sep 2013.
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- Julian Alworth & Giampaolo Arachi, 2001. "The Effect of Taxes on Corporate Financing Decisions: Evidence from a Panel of Italian Firms," International Tax and Public Finance, Springer, vol. 8(4), pages 353-376, August.
- Faig, Miquel & Shum, Pauline, 1999. "Irreversible investment and endogenous financing: An evaluation of the corporate tax effects," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 143-171, February.
- Zyblock, Miles, 1997. "L'effet de levier financier des entreprises : une comparaison entre le Canada et les E.-U., 1961-1996," Direction des etudes analytiques : documents de recherche 1997111f, Statistics Canada, Direction des etudes analytiques.
- Zyblock, Miles, 1997. "Corporate Financial Leverage: A Canada - U.S. Comparison, 1961-1996," Analytical Studies Branch Research Paper Series 1997111e, Statistics Canada, Analytical Studies Branch.
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