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Japanese Firms’ Debt Policy And Tax Policy

Author

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  • Kunieda, Shigeki
  • Takahata, Junichiro
  • Yada, Haruna

Abstract

Understanding the effects of marginal tax rate on debt policy is crucial not only for considering various capital structure theories of firms but also for evaluating corporate tax reform proposals. In this empirical study, we have found a positive relation in most cases between the firm-specific marginal tax rates (simulated using the method of Shevlin (1990) and Graham (1996)) and the debt ratio increase of Japanese firms. This result shows that the marginal tax rates significantly affect the debt policies of Japanese firms. Corporate tax reform to produce equal treatment of equity and debt is desirable in Japan.

Suggested Citation

  • Kunieda, Shigeki & Takahata, Junichiro & Yada, Haruna, 2011. "Japanese Firms’ Debt Policy And Tax Policy," Discussion Papers 2011-11, Graduate School of Economics, Hitotsubashi University.
  • Handle: RePEc:hit:econdp:2011-11
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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/21194/1/070econDP11-11.pdf
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    References listed on IDEAS

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    5. Gordon, Roger H. & Lee, Young, 2001. "Do taxes affect corporate debt policy? Evidence from U.S. corporate tax return data," Journal of Public Economics, Elsevier, vol. 82(2), pages 195-224, November.
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    Cited by:

    1. Ruud A. de Mooij & Ikuo Saito, 2014. "Japan’s Corporate Income Tax; Facts, Issues and Reform Options," IMF Working Papers 14/138, International Monetary Fund.

    More about this item

    Keywords

    debt; capital structure; marginal tax rate; corporate tax;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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