Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/26476 
Year of Publication: 
2008
Series/Report no.: 
CESifo Working Paper No. 2431
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Tax neutrality towards alternative financing instruments for corporate investment is a ubiquitous demand in the political debate. At the same time, the literature is surprisingly silent about the magnitude of possible efficiency costs of a departure from tax neutrality. Against this background, the present paper discusses the theory of capital structure and provides backof-the-envelope calculations of the possible efficiency cost of a tax distortion of the debtequity decision.
Subjects: 
Debt-equity choice
capital structure
excess burden of taxation
JEL: 
H25
G32
Document Type: 
Working Paper
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