Parameters
More about the book
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 19732008. 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.
Book purchase
Tax incentives and capital structure choice, Thom Hartmann
- Language
- Released
- 2012
Payment methods
- Title
- Tax incentives and capital structure choice
- Language
- English
- Authors
- Thom Hartmann
- Released
- 2012
- ISBN10
- 3865588298
- ISBN13
- 9783865588296
- Category
- Business and Economics
- Description
- 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 19732008. 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.