Tax reforms to influence corporate financial policy: the case of the Italian business tax reform of 1997-98
In this paper company-level panel data are used to explore the role of tax changes on corporate financial policy. A panel model for the years 1993-98 is estimated confirming the explanatory power of the tax variable. The estimation also shows that firms reduced leverage in the last three years (1996-98) as a reaction to important tax changes; the reduction in 1996 was the effect of the temporary investment tax credit of the previous year, while the one in 1997-98 was the result of the business tax reform started in 1997. The reform, by modifying the system for taxing profits, termed Dual income Tax (DIT), and introducing a new regional tax on business activity (IRAP), reduced the bias against equity finance that was present in the previous tax system. Focusing on the reform, a Logit model is estimated to highlight the characteristics of firms that used the DIT tax system in the first two years. The probability of using the DIT increases with profitability, productivity and investment. The significance of the latter variable suggests that the DIT system was used by firms to reduce the cost of financing new investments after the temporary investment tax credit of 1995.
|Date of creation:||Nov 2001|
|Date of revision:|
|Contact details of provider:|| Postal: Via Nazionale, 91 - 00184 Roma|
Web page: http://www.bancaditalia.it
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:bdi:wptemi:td_423_01. 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: ()
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.