Taxes and Corporate Debt Policy: Evidence for Unlisted Firms of Sixteen European Countries

108 Pages Posted: 28 Feb 2008

See all articles by Jan Bartholdy

Jan Bartholdy

University of Aarhus - Aarhus School of Business - Department of Business Studies

Cesario Mateus

Aalborg University

Date Written: February 26, 2008

Abstract

This paper investigates the capital structure choices for a sample of 19,752 unlisted firms for the period 1994-2004 using a rich data set of unlisted Western European firms. It is to the best of our knowledge the first large sample study to examine how a firm's characteristics and institutional factors affect corporate debt policy in small and medium sized enterprises (SMEs). We address the following questions. Is the capital structure of SMEs and large listed firms driven by similar factors? Can the existing knowledge in relation to large listed firms be used to describe SME behaviour? Alternatively, are these types of firm so different that we have to build a new theory to understand their behaviour of SMEs? The results demonstrate that the traditional financing theories, developed to apply to large listed firms, appear to hold for SMEs in an international setting. In addition, country specific factors help to explain leverage choices.

Keywords: Capital Structure, Debt, Trade-off Theory, Western Europe

JEL Classification: G3, G32

Suggested Citation

Bartholdy, Jan and Mateus, Cesario, Taxes and Corporate Debt Policy: Evidence for Unlisted Firms of Sixteen European Countries (February 26, 2008). Available at SSRN: https://ssrn.com/abstract=1098370 or http://dx.doi.org/10.2139/ssrn.1098370

Jan Bartholdy

University of Aarhus - Aarhus School of Business - Department of Business Studies ( email )

Fuglesangs Alle 4
DK-8210 Aarhus
Denmark
+4589486338 (Phone)
+4586151943 (Fax)

Cesario Mateus (Contact Author)

Aalborg University

Fredrik Bajers Vej 7E
Aalborg, DK-9220
Denmark

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