Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/181552
Authors: 
Harendt, Christoph
Year of Publication: 
2018
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2018: Digitale Wirtschaft - Session: Business Economics II E07-V1
Abstract: 
A well-known strategy of tax avoidance by multinationals is to locate debt in subsidiaries in countries with a high tax rate. In case of M&As it is particularly advantageous to locate debt at the level of holdings. By using firm-level data provided by the German Central Bank, I show empirically that indeed the probability that a firm is held by a holding in the same country increases with the local tax rate. Furthermore, consolidating the balance sheets of firms and their holdings leads to a stronger effect of taxes on the debt ratio. However, I find this effect only for a sample of all firms and no additional effect in case of M&As. I conclude that those findings may be one explanation why previous studies have found relatively low effects of taxes on debt financing.
Subjects: 
Corporate Taxation
Multinational Entities
Foreign Direct Investment
Capital structure
Mergers and acquisitions
Empirical Analysis
Firm-level data
JEL: 
F23
G32
G34
H25
H26
H32
Document Type: 
Conference Paper

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