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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/55334
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| Title: | | Taxes do affect corporate financing decisions: The case of Belgian ACE  |
| Authors: | | Princen, Savina |
| Issue Date: | | 2012 |
| Series/Report no.: | | CESifo working paper: Public Finance 3713 |
| Abstract: | | In this paper, I use difference-in-differences regressions to measure how the debt tax shield affects the capital structure of a company. By comparing the financial leverage of treatment and control companies before and after the introduction of an equity tax shield, I infer the impact of the tax discrimination between debt and equity. Consistent with the theoretical prediction, the estimated results show that the introduction of an equity tax shield has a significant negative effect on the financial leverage of a company. This effect amounts to approximately 2-7%, meaning that a classical tax system encourages companies to use on average 2-7% more debt than when there is an equal tax treatment of debt and equity. |
| Subjects: | | allowance for corporate equity corporate financing decisions |
| JEL: | | G30 H25 K34 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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