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The impact of thin-capitalization rules on the capital structure of multinational firms

  • Buettner, Thiess
  • Overesch, Michael
  • Schreiber, Ulrich
  • Wamser, Georg

This paper analyzes the effectiveness of limitations of the tax deductibility of interest expenses for multinational corporations, so-called thin-capitalization rules. The empirical investigation exploits a large micro-level panel dataset of multinational firms to analyze the effects of thin-capitalization rules on the capital structure of foreign subsidiaries located in OECD countries in the time period between 1996 and 2004. The findings indicate that thin-capitalization rules effectively reduce the incentive to use internal loans for tax planning but result in higher external debt.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 96 (2012)
Issue (Month): 11 ()
Pages: 930-938

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Handle: RePEc:eee:pubeco:v:96:y:2012:i:11:p:930-938
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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