Advanced Search
MyIDEAS: Login

Taxation and Capital Structure: Evidence from a Transition Economy

Contents:

Author Info

  • Konstantinos Tzioumis
  • Leora F. Klapper

Abstract

We examine the effects of taxation on financing policy using the corporate tax reform in 2001 in Croatia as a quasi-natural experiment. Since the extant literature on tax effects on capital structure studies listed firms in developed countries, it is worth investigating whether the same results apply to privately-held small and medium enterprises in transition economies. The findings provide significant evidence that lower taxes have affected the capital structure of Croatian firms, resulting in increased equity levels. These findings are consistent with the trade-off theory of capital structure, which suggests that lower taxes increase the incentive to hold equity due to decreasing interest tax deductibility of debt.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ingentaconnect.com/content/mohr/fa/2012/00000068/00000002/art00003
Download Restriction: Fulltext access is included for subscribers to the printed version.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 68 (2012)
Issue (Month): 2 (June)
Pages: 165-190

as in new window
Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201206)68:2_165:tacsef_2.0.tx_2-b

Contact details of provider:
Web page: http://www.mohr.de/fa

Order Information:
Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Email:

Related research

Keywords: capital structure; taxation; transition economies;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Alexander Klemm, 2007. "Allowances for Corporate Equity in Practice," CESifo Economic Studies, CESifo, vol. 53(2), pages 229-262, June.
  2. Nivorozhkin, Eugene, 2005. "Financing choices of firms in EU accession countries," Emerging Markets Review, Elsevier, vol. 6(2), pages 138-169, June.
  3. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  4. Sanjiva Prasad & Christopher J. Green & Victor Murinde, 2001. "Company Financing, Captial Structure, and Ownership: A Survey, and Implications for Developing Economies," SUERF Studies, SUERF - The European Money and Finance Forum, number 12 edited by Morten Balling, November.
  5. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
  6. Ayers, Benjamin C. & Cloyd, C. Bryan & Robinson, John R., 2001. "The Influence of Income Taxes on the Use of Inside and Outside Debt By Small Businesses," National Tax Journal, National Tax Association, vol. 54(n. 1), pages 27-56, March Cit.
  7. Flannery, Mark J. & Rangan, Kasturi P., 2006. "Partial adjustment toward target capital structures," Journal of Financial Economics, Elsevier, vol. 79(3), pages 469-506, March.
  8. Vjekoslav Bratic, 2006. "Tax expenditure in Croatia: personal income, corporate income, real estate transfers and value added tax," Financial Theory and Practice, Institute of Public Finance, vol. 30(2), pages 101-111.
  9. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
  10. MacKie-Mason, Jeffrey K, 1990. " Do Taxes Affect Corporate Financing Decisions?," Journal of Finance, American Finance Association, vol. 45(5), pages 1471-93, December.
  11. John R. Graham, 2000. "How Big Are the Tax Benefits of Debt?," Journal of Finance, American Finance Association, vol. 55(5), pages 1901-1941, October.
  12. Rajan, Raghuram G & Zingales, Luigi, 1995. " What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-60, December.
  13. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
  14. Auerbach, Alan J., 2002. "Taxation and corporate financial policy," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 19, pages 1251-1292 Elsevier.
  15. Michael Keen & John King, 2002. "The Croatian profit tax: an ACE in practice," Fiscal Studies, Institute for Fiscal Studies, vol. 23(3), pages 401-418, September.
  16. Roger H. Gordon & Jeffrey K. MacKie-Mason, 1990. "Effects of the Tax Reform Act of 1986 on Corporate Financial Policy and Organizational Form," NBER Working Papers 3222, National Bureau of Economic Research, Inc.
  17. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
  18. Givoly, Dan, et al, 1992. "Taxes and Capital Structure: Evidence from Firms' Response to the Tax Reform Act of 1986," Review of Financial Studies, Society for Financial Studies, vol. 5(2), pages 331-55.
  19. Franck Bancel & Usha R. Mittoo, 2004. "Cross-Country Determinants of Capital Structure Choice: A Survey of European Firms," Financial Management, Financial Management Association, vol. 33(4), Winter.
  20. Phillips, Gordon M., 1995. "Increased debt and industry product markets An empirical analysis," Journal of Financial Economics, Elsevier, vol. 37(2), pages 189-238, February.
  21. Shackelford, Douglas A. & Shevlin, Terry, 2001. "Empirical tax research in accounting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 321-387, September.
  22. Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
  23. Ralph De Haas & Daniel Ferreira & Anita Taci, 2007. "What determines banks’ customer choice? Evidence from transition countries," Working Papers 104, European Bank for Reconstruction and Development, Office of the Chief Economist.
  24. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Feld, Lars P. & Heckemeyer, Jost H. & Overesch, Michael, 2011. "Capital structure choice and company taxation: A meta-study," ZEW Discussion Papers 11-075, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. George Kazamias, 2010. "From Pragmatism to Idealism to Failure: Britain in the Cyprus crisis of 1974," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 42, Hellenic Observatory, LSE.
  3. Theodore Pelagidis, 2010. "The Greek paradox of falling competitiveness and weak institutions in a high GDP growth rate context (1995-2008)," LSE Research Online Documents on Economics 29098, London School of Economics and Political Science, LSE Library.
  4. Nicholas Apergis, 2011. "Characteristics of inflation in Greece: mean spillover effects among CPI components," LSE Research Online Documents on Economics 32597, London School of Economics and Political Science, LSE Library.
  5. Matthias Stöckl & Hannes Winner, . "Capital Structure and Corporate Taxation. Empirical Evidence from European Panel Data," WIFO Working Papers 422, WIFO.
  6. Matthias Stöckl & Hannes Winner, 2013. "Koerperschaftsbesteuerung und Unternehmensverschuldung: Evidenz aus einem Europaeischen Firmenpanel," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 233(2), pages 188-205, March.
  7. Stelios Karagiannis & Yannis Panagopoulos & Prodromos Vlamis, 2010. "Symmetric or Asymmetric Interest Rate Adjustments? Evidence from Greece, Bulgaria and Slovenia," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 39, Hellenic Observatory, LSE.
  8. George Pagoulatos & Nikolaos Zahariadis, 2011. "Politics, Labor, Regulation, and Performance: lessons from the privatization of OTE," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 46, Hellenic Observatory, LSE.
  9. Spyros Kosmidis, 2013. "Government Constraints and Economic Voting in Greece," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 70, Hellenic Observatory, LSE.
  10. Horen Voskeritsian & Andreas Kornelakis, 2011. "Institutional Change in Greek Industrial Relations in an Era of Fiscal Crisis," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 52, Hellenic Observatory, LSE.
  11. Vassilis Monastiriotis, 2011. "Regional distribution and spatial impact of FDI in Greece: evidence from firm-level data," LSE Research Online Documents on Economics 32566, London School of Economics and Political Science, LSE Library.
  12. Spyros Kosmidis, 2013. "Government constraints and economic voting in Greece," LSE Research Online Documents on Economics 50259, London School of Economics and Political Science, LSE Library.
  13. Christos Dimas, 2010. "Privatization in the Name of ‘Europe’: analyzing the telecoms privatization in Greece from a ‘discursive institutionalist’ perspective," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 41, Hellenic Observatory, LSE.
  14. Vassilis Monastiriotis & Jacob A. Jordaan, 2011. "Regional Distribution and Spatial Impact of FDI in Greece: evidence from firm-level data," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 44, Hellenic Observatory, LSE.
  15. Christos Dimas, 2010. "Privatization in the name of ‘Europe’: analyzing the telecoms privatization in Greece from a ‘discursive institutionalist’ perspective," LSE Research Online Documents on Economics 31089, London School of Economics and Political Science, LSE Library.
  16. Christos Lyrintzis, 2011. "Greek Politics in the Era of Economic Crisis: Reassessing Causes and Effects," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 45, Hellenic Observatory, LSE.
  17. Christos Lyrintzis, 2011. "Greek politics in the era of economic crisis: reassessing causes and effects," LSE Research Online Documents on Economics 33826, London School of Economics and Political Science, LSE Library.
  18. George Pagoulatos & Nikolaos Zahariadis, 2011. "Politics, labor, regulation, and performance: lessons from the privatization of OTE," LSE Research Online Documents on Economics 33827, London School of Economics and Political Science, LSE Library.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:mhr:finarc:urn:sici:0015-2218(201206)68:2_165:tacsef_2.0.tx_2-b. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Wolpert).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.