Abstract

http://ssrn.com/abstract=1130887
 
 

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Taxation and Capital Structure: Evidence from a Transition Economy


Konstantinos Tzioumis


Government of the United States of America - Office of the Comptroller of the Currency (OCC)

Leora F. Klapper


World Bank; World Bank - Development Research Group (DECRG)

October 20, 2011

FinanzArchiv: Public Finance Analysis, Vol. 68(2), 2012.

Abstract:     
We examine the effects of taxation on financing policy using the corporate tax reform in 2001 in Croatia as a quasi-natural experiment. Since the extant literature on tax effects on capital structure studies listed firms in developed countries, it is worth investigating whether the same results apply to privately-held small and medium enterprises in transition economies. The findings provide significant evidence that lower taxes have affected the capital structure of Croatian firms, resulting in increased equity levels. These findings are consistent with the trade-off theory of capital structure, which suggests that lower taxes increase the incentive to hold equity due to decreasing interest tax deductibility of debt.

Number of Pages in PDF File: 35

Keywords: Capital structure, Taxation, Transition Economies

JEL Classification: G32, G38, K34

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Date posted: October 27, 2008 ; Last revised: July 2, 2013

Suggested Citation

Tzioumis, Konstantinos and Klapper, Leora F., Taxation and Capital Structure: Evidence from a Transition Economy (October 20, 2011). FinanzArchiv: Public Finance Analysis, Vol. 68(2), 2012.. Available at SSRN: http://ssrn.com/abstract=1130887 or http://dx.doi.org/10.2139/ssrn.1130887

Contact Information

Konstantinos Tzioumis (Contact Author)
Government of the United States of America - Office of the Comptroller of the Currency (OCC) ( email )
Constitution Center
400 7th Street, S.W
Washington, DC 20024
United States
Leora F. Klapper
World Bank ( email )
1818 H Street, N.W.
Washington, DC 20433
United States
202-473-8738 (Phone)
HOME PAGE: http://econ.worldbank.org/staff/lklapper
World Bank - Development Research Group (DECRG)
1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
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