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Capital Structure and International Debt Shifting Author info | Abstract | Publisher info | Download info | Related research | Statistics Luc Laeven
Gaetan Nicodeme
Harry Huizinga
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This paper presents a model of a multinational firm's optimal debt policy that incorporates international taxation factors. The model yields the prediction that a multinational firm's indebtedness in a country depends on a weighted average of national tax rates and differences between national and foreign tax rates. These differences matter because multinationals have an incentive to shift debt to high-tax countries. The predictions of the model are tested using a novel firm-level dataset for European multinationals and their subsidiaries, combined with newly collected data on the international tax treatment of dividend and interest streams. Our empirical results show that corporate debt policy indeed not only reflects domestic corporate tax rates but also differences in international tax systems. These findings contribute to our understanding of how corporate debt policy is set in an international context.
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Paper provided by International Monetary Fund in its series IMF Working Papers with number
07/39.
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Length: 37 pages
Date of creation: 26 Feb 2007Date of revision:
Handle: RePEc:imf:imfwpa:07/39Contact details of provider: Postal: International Monetary Fund, Washington, DC USA Phone: (202) 623-7000 Fax: (202) 623-4661 Email: Web page: http://www.imf.org/external/pubind.htm More information through EDIRC
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For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).
Keywords: Corporate taxation financial structure debt shifting Debt Tax rates Tax policy Capital Economic models Other versions of this item:
Article Paper Huizinga, Harry & Laeven, Luc & Nicodeme, Gaetan, 2006.
"Capital Structure and International Debt Shifting ,"
CEPR Discussion Papers
5882, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Harry Huizinga & Luc Laeven & Gaëtan Nicodème, 2007.
"Capital Structure and International Debt Shifting ,"
Working Papers CEB
07-015.RS, Université Libre de Bruxelles, Solvay Business School, Centre Emile Bernheim (CEB).
[Downloadable!] This paper has been announced in the following NEP Reports :
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references Cited by : (explanations , 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.)
Peter Egger & Wolfgang Eggert & Hannes Winner, 2007.
"Saving Taxes Through Foreign Plant Ownership ,"
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Overesch, Michael & Voeller, Dennis, 2008.
"The Impact of Personal and Corporate Taxation on Capital Structure Choices ,"
ZEW Discussion Papers
08-020, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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Büttner, Thiess & Overesch, Michael & Schreiber, Ulrich & Wamser, Georg, 2006.
"The Impact of Thin-Capitalization Rules on Multinationals’ Financing and Investment Decisions ,"
ZEW Discussion Papers
06-68, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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Thiess Buettner & Michael Overesch & Ulrich Schreiber & Georg Wamser, 2006.
"The Impact of Thin-Capitalization Rules on Multinationals' Financing and Investment Decisions ,"
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CESifo Working Paper Series
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2008,03, Deutsche Bundesbank, Research Centre.
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