Capital Structure Choice and Company Taxation: A Meta-Study
Lars P. Feld
Ruprecht-Karls-University Heidelberg; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Centre for European Economic Research (ZEW)
Universität zu Köln
March 1, 2011
ZEW - Centre for European Economic Research Discussion Paper No. 11-075
This paper provides a quantitative review of the empirical literature on the tax impact on corporate debt financing. Synthesizing the evidence from 46 previous studies, we find that this impact is substantial. In particular, the tax rate proxy determines the outcome of primary analyses. Measures like the simulated marginal tax rate (Graham (1996a) avoid a downward bias in estimates for the debt response to tax. Moreover, debt characteristics, econometric specifications, and the set of control-variables affect tax effects. Accounting for misspecification biases by means of meta-regressions, we predict a marginal tax effect on the debt ratio of 0.3.
Number of Pages in PDF File: 65
Keywords: Capital Structure, Corporate Income Tax, Meta-Analysis
JEL Classification: G30, H32, F23working papers series
Date posted: January 18, 2012
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