Capital Structure and International Debt Shifting: A Comment
In a recent article, Huizinga, Laeven and Nicodème (2008) present a novel model that motivates an extensive empirical analysis of international debt shifting. We point out that the model fails to account for internal debt, and that once internal debt is properly accounted for, the external debt mechanism they propose is not identified in the empirical analysis. We also point out that affiliate specific debt costs reduce affiliate dividends. When this is implemented in the model, their regression equation can only be derived under the very restrictive assumption that effective tax rates on dividends are the same in all countries.
|Date of creation:||22 Aug 2008|
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- Büttner, Thiess & Overesch, Michael & Schreiber, Ulrich & Wamser, Georg, 2006.
"Taxation and capital structure choice: evidence from a panel of German multinationals,"
ZEW Discussion Papers
06-67, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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NBER Working Papers
9715, National Bureau of Economic Research, Inc.
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- Jack Mintz & Alfons Weichenrieder, 2005. "Taxation and the Financial Structure of German Outbound FDI," CESifo Working Paper Series 1612, CESifo Group Munich.
- Chowdhry, Bhagwan & Coval, Joshua D., 1998. "Internal financing of multinational subsidiaries: Debt vs. equity1," Journal of Corporate Finance, Elsevier, vol. 4(1), pages 87-106, March.
- Leechor, Chad & Mintz, Jack, 1993. "On the taxation of multinational corporate investment when the deferral method is used by the capital exporting country," Journal of Public Economics, Elsevier, vol. 51(1), pages 75-96, May.
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