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Tax Status and Tax Response Heterogeneity of Multinationals' Debt Finance

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Author Info

  • Thiess Buettner
  • Michael Overesch
  • Georg Wamser

Abstract

This paper analyzes how corporate taxation affects the capital structure of subsidiaries of multinational companies. The emphasis is on firm characteristics that proxy for the tax status of a subsidiary, which is crucial for the tax responsiveness of firms. Based on a comprehensive panel of German multinationals, we find that the tax sensitivity of the capital structure is significantly affected by several firm characteristics. Our results imply that well-known non-debttax shields such as depreciation allowances and loss carryforwards reduce the tax sensitivity of the debt-to-capital ratio. We also find that a higher probability of experiencing losses reduces the tax-rate sensitivity of debt financing.

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Bibliographic Info

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

Volume (Year): 67 (2011)
Issue (Month): 2 (June)
Pages: 103-122

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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(291106)67:2_103:tsatrh_2.0.tx_2-8

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Related research

Keywords: non-debttax shields; corporate taxation; debt finance; firm-level data;

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Cited by:
  1. Schindler, Dirk & Møen, Jarle & Schjelderup, Guttorm & Tropina, Julia, 2013. "International Debt Shifting: Do Multinationals Shift Internal or External Debt?," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79749, Verein für Socialpolitik / German Economic Association.

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