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Title:The Impact of Thin-Capitalization Rules on Multinationals? Financing and Investment Decisions PDF Logo
Authors:Schreiber, Ulrich
Overesch, Michael
Büttner, Thiess
Wamser, Georg
Issue Date:2006
Series/Report no.:ZEW Discussion Papers 06-68
Abstract:This paper analyzes the role of Thin-Capitalization rules for capital structure choice and investment decisions of multinationals. A theoretical analysis shows that the imposition of such rules tends to affect not only the leverage and the level of investment but also their tax-sensitivity. An empirical investigation of leverage and investment reported for affiliates of German multinationals in 24 countries in the period between 1996 and 2004 offers some support for the theoretical predictions. While Thin-Capitalization rules are found to be effective in restricting debt finance, investment is found to be more sensitive to taxes if debt finance is restricted.
Subjects:Corporate Income Tax
Multinationals
Leverage
Thin-Capitalization Rules
Firm-Level Data
JEL:H26
G32
H25
Document Type:Working Paper
Appears in Collections:ZEW Discussion Papers
Publikationen von Forscherinnen und Forschern des ZEW

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