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Discussion Papers, Deutsche Bundesbank >
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http://hdl.handle.net/10419/64815
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| Title: | | Tax incentives and capital structure choice: Evidence from Germany  |
| Authors: | | Hartmann-Wendels, Thomas Stein, Ingrid Stöter, Alwin |
| Issue Date: | | 2012 |
| Series/Report no.: | | Discussion Paper, Deutsche Bundesbank 18/2012 |
| Abstract: | | This paper provides new evidence that taxes affect capital structure choice, using a unique and comprehensive panel data set which covers 86,173 German non-financial firms over the years 1973-2008. Following the Graham methodology to simulate marginal tax rates, we find a statistically and economically significant positive relationship between the marginal tax benefit of debt (net and gross of investor taxes) and the debt ratio. A 10% increase in the net (gross) marginal tax benefit of debt causes a 1.5% (1.6%) increase in the debt ratio, ceteris paribus. The results are robust to various specifications like using changes in debt or debt to capital ratios. A significantly positive effect of taxes on the debt ratio can also be identified in a partial adjustment model. |
| Subjects: | | debt capital structure marginal tax rate corporate taxes personal taxes |
| JEL: | | G32 H20 |
| ISBN: | | 978-3-86558-830-2 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Discussion Papers, Deutsche Bundesbank
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