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Capital Structure Choice and Company Taxation: A Meta-StudyLars P. FeldRuprecht-Karls-University Heidelberg; CESifo (Center for Economic Studies and Ifo Institute for Economic Research) Jost HeckemeyerCentre for European Economic Research (ZEW) Michael OvereschUniversität zu Köln March 1, 2011 ZEW - Centre for European Economic Research Discussion Paper No. 11-075 Abstract: 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, F23 working papers seriesDate posted: January 18, 2012Suggested CitationContact Information
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