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Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank >
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http://hdl.handle.net/10419/19715
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| Title: | | The impact of thin-capitalization rules on multinationals' financing and investment decisions  |
| Authors: | | Büttner, Thiess Overesch, Michael Schreiber, Ulrich Wamser, Georg |
| Issue Date: | | 2008 |
| Series/Report no.: | | Discussion paper Series 1 / Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank 2008,03 |
| Abstract: | | This paper analyzes the effectiveness of thin-capitalization rules in preventing debt finance by intercompany loans and explores their consequences for corporate decisions. A theoretical discussion emphasizes that limitations of the deduction of interest owed to foreign affiliates would not only affect multinationals' capital structure choice but also investment. An empirical investigation exploits a large firm-level panel dataset of multinationals in order to analyze the impact of thin-capitalization rules on capital structure choice and investment in the OECD and some further European countries in the time period between 1996 and 2004. The results indicate that thin-capitalization rules are effective in curbing tax planning via intercompany loans. However, investment is found to be adversely affected. |
| Subjects: | | Corporate Income Tax Multinationals Leverage Thin-Capitalization Rules Firm-Level Data |
| JEL: | | G32 H26 H25 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank
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