Abstract

http://ssrn.com/abstract=918460
 
 

References (26)



 
 

Citations (48)



 


 



Capital Structure and International Debt Shifting


Harry Huizinga


Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR)

Luc Laeven


International Monetary Fund (IMF); Centre for Economic Policy Research (CEPR)

Gaetan Nicodeme


Université Libre de Bruxelles (ULB) - Solvay Brussels School of Economics and Management

July 2006


Abstract:     
This paper presents a model that relates a multinational firm's optimal debt policy to taxation and to non-tax factors such as the desire to prevent bankruptcy. The model yields the predictions that a multinational's indebtedness in a country depends on national tax rates and differences between national and foreign tax rates. These differences matter as multinationals have an incentive to shift debt to high-tax countries. The predictions of the model are tested with the aid of a broad European data set combining firm-level data and information on the international tax treatment of dividend and interest streams. Corporate debt policy indeed appears to reflect national corporate tax rates and international corporate tax rate differences but not nonresident dividend withholding taxes.

Number of Pages in PDF File: 47

Keywords: corporate taxation, financial structure, debt shifting

JEL Classification: F23, G32, H25

working papers series





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Date posted: July 25, 2006  

Suggested Citation

Huizinga, Harry and Laeven, Luc and Nicodeme, Gaetan, Capital Structure and International Debt Shifting (July 2006). Available at SSRN: http://ssrn.com/abstract=918460 or http://dx.doi.org/10.2139/ssrn.918460

Contact Information

Harry Huizinga
Tilburg University - Center for Economic Research (CentER) ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2623 (Phone)
+31 13 466 3042 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Luc A. Laeven (Contact Author)
International Monetary Fund (IMF) ( email )
700 19th Street, N.W.
Washington, DC 20431
United States
202-6239020 (Phone)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Gaetan Nicodeme
Université Libre de Bruxelles (ULB) - Solvay Brussels School of Economics and Management ( email )
50 Avenue Roosevelt
Brussels 1050
Belgium
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