Capital Structure Choice and Company Taxation: A Meta-Study

50 Pages Posted: 4 Apr 2011

See all articles by Lars P. Feld

Lars P. Feld

Walter Eucken Institute; University of Freiburg - College of Economics and Behavioral Sciences; CESifo (Center for Economic Studies and Ifo Institute)

Jost H. Heckemeyer

University of Kiel - Faculty of Economics and Social Sciences; ZEW – Leibniz Centre for European Economic Research

Michael Overesch

Universität zu Köln

Multiple version iconThere are 2 versions of this paper

Date Written: March 31, 2011

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.

Keywords: capital structure, corporate income tax, meta-analysis

JEL Classification: G300, H320, F230

Suggested Citation

Feld, Lars P. and Heckemeyer, Jost H. and Overesch, Michael, Capital Structure Choice and Company Taxation: A Meta-Study (March 31, 2011). CESifo Working Paper Series No. 3400. Available at SSRN: https://ssrn.com/abstract=1802361

Lars P. Feld (Contact Author)

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg im Breisgau, Baden-Württemberg D-79100
Germany

University of Freiburg - College of Economics and Behavioral Sciences ( email )

Freiburg, D-79085
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Jost H. Heckemeyer

University of Kiel - Faculty of Economics and Social Sciences ( email )

Kiel
Germany

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Michael Overesch

Universität zu Köln ( email )

Albertus-Magnus-Platz
WiSo-Gebäude
Cologne, 50923
Germany
0221/470-5605 (Phone)

HOME PAGE: http://www.steuer.uni-koeln.de/

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