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Taxation and capital structure choice--Evidence from a panel of German multinationals

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  • Buettner, Thiess
  • Overesch, Michael
  • Schreiber, Ulrich
  • Wamser, Georg

Abstract

The capital structure of foreign affiliates is analyzed using a large panel of German multinationals. While taxes are found to encourage debt finance in general, adverse local credit market conditions result in lower external borrowing but higher internal debt indicating that the two channels of debt finance are substitutes.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 105 (2009)
Issue (Month): 3 (December)
Pages: 309-311

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Handle: RePEc:eee:ecolet:v:105:y:2009:i:3:p:309-311

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Web page: http://www.elsevier.com/locate/ecolet

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Keywords: Corporate income tax Multinationals Capital structure Internal debt Firm-level data;

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References

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  1. Mihir A. Desai & C. Fritz Foley & James R. Hines, Jr., 2003. "A Multinational Perspective on Capital Structure Choice and Internal Capital Markets," NBER Working Papers 9715, National Bureau of Economic Research, Inc.
  2. Jeffrey MacKie-Mason, 1988. "Do Taxes Affect Corporate Financing Decisions?," NBER Working Papers 2632, National Bureau of Economic Research, Inc.
  3. Hines, James R, Jr & Rice, Eric M, 1994. "Fiscal Paradise: Foreign Tax Havens and American Business," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(1), pages 149-82, February.
  4. Mintz, Jack & Smart, Michael, 2004. "Income shifting, investment, and tax competition: theory and evidence from provincial taxation in Canada," Journal of Public Economics, Elsevier, Elsevier, vol. 88(6), pages 1149-1168, June.
  5. Jack Mintz & Alfons Weichenrieder, 2005. "Taxation and the Financial Structure of German Outbound FDI," CESifo Working Paper Series 1612, CESifo Group Munich.
  6. Alan J. Auerbach, 2001. "Taxation and Corporate Financial Policy," NBER Working Papers 8203, National Bureau of Economic Research, Inc.
  7. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, Elsevier, vol. 5(2), pages 147-175, November.
  8. Roger H. Gordon & Young Lee, 1999. "Do Taxes Affect Corporate Debt Policy? Evidence from US Corporate Tax Return Data," NBER Working Papers 7433, National Bureau of Economic Research, Inc.
  9. Rosanne Altshuler & Harry Grubert, 2001. "Repatriation Taxes, Repatriation Strategies and Multinational Financial Policy," NBER Working Papers 8144, National Bureau of Economic Research, Inc.
  10. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, Elsevier, vol. 3(4), pages 305-360, October.
  11. John R. Graham, 2003. "Taxes and Corporate Finance: A Review," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 16(4), pages 1075-1129.
  12. Harry Grubert, 2003. "The Tax Burden on Cross-Border Investment: Company Strategies and Country Responses," CESifo Working Paper Series 964, CESifo Group Munich.
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