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Capital structure choice and company taxation: A meta-study

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  • Feld, Lars P.
  • Heckemeyer, Jost H.
  • Overesch, Michael

Abstract

This paper provides a quantitative review of the empirical literature on the tax impact on corporate debt financing. Synthesizing the evidence from 48 previous studies, we find that this impact is substantial. In particular, the tax rate proxy determines the outcome of primary analyses. Measures like the simulated marginal tax rate (Graham, 1996) avoid a downward bias in estimates for the debt response to tax. Moreover, econometric specifications and the set of control-variables affect tax effects. Accounting for misspecification biases by means of meta-regressions, we predict a marginal tax effect on the debt ratio of about 0.27.

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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 37 (2013)
Issue (Month): 8 ()
Pages: 2850-2866

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Handle: RePEc:eee:jbfina:v:37:y:2013:i:8:p:2850-2866

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Keywords: Capital structure; Corporate income tax; Meta-analysis;

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