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Corporate Taxation, Debt Financing and Foreign Plant Ownership Author info | Abstract | Publisher info | Download info | Related research | Statistics Christian Keuschnigg ()
Peter Egger ()
Wolfgang Eggert ()
Hannes Winner ()
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This paper compares domestically and foreign-owned plants with respect to their debt-toassets ratio and analyzes to which extent the difference is systematically affected by corporate taxation. To derive hypotheses about influence of corporate taxation on a firm's debt financing we adapt a standard model of taxation and financing decisions of firms for the case of international debt shifting activities of foreign-owned firms. We estimate the average difference between a foreign-owned and a domestically-owned firm's debt ratio, treating the mode of ownership as endogenous. Using data from 32,067 European firms, we find that foreign-owned firms on average exhibit a significantly higher debt ratio than their domestically-owned counterparts in the host country. Moreover, this gap in the debt ratio increases with the host country's statutory corporate tax rate.
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Paper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2009 with number
2009-01.
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Length: 25 pages
Date of creation: Feb 2009Date of revision:
Handle: RePEc:usg:dp2009:2009-01Contact details of provider: Postal: Dufourstrasse 50, CH - 9000 St.Gallen Email: Web page: http://www.vwa.unisg.ch/ More information through EDIRC
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Keywords: Corporate taxation ; Multinational firms ; Financial structure ; Debt shifting ; Propensity score matching ; Other versions of this item:
Find related papers by JEL classification: H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
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Michael P. Devereux & Christian Keuschnigg, 2009.
"The Distorting Arm’s Length Principle ,"
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