Value of Debt Tax Shields in Colombia: An Empirical Study

28 Pages Posted: 31 Aug 2011 Last revised: 16 Sep 2020

See all articles by Rafael Salas-Pérez

Rafael Salas-Pérez

University of Birmingham - Birmingham Business School; Universidad Tecnológica de Bolívar

Juan Gutiérrez Ruiz

Universidad de Valencia

Ignacio Velez-Pareja

Grupo Consultor CAV Capital Advisory & Valuation

Date Written: July 28, 2011

Abstract

The Spanish version of this paper can be found http://ssrn.com/abstract=1899685

This paper estimates the value of tax shields, using the discounted cash flow method for 23 major non financial firms listed in the Bolsa de Valores de Colombia (Colombian Stock Exchange) between 2001 and 2010. Our results show that on average this value represents between 7.6% and 9.3% of firm value, depending on which discount rate is used for tax shields. It also finds that firms’ average leverage is low relative to other countries. Using Data Panel regressions, no conclusive evidence was found on whether or not debt created value for the sampled firms within that timespan.

Keywords: Debt Tax Shields, Discount Rates, Firm Value, Leverage, Colombia

JEL Classification: G12, G32, M21, M41

Suggested Citation

Salas-Pérez, Rafael and Gutiérrez Ruiz, Juan and Velez-Pareja, Ignacio, Value of Debt Tax Shields in Colombia: An Empirical Study (July 28, 2011). Available at SSRN: https://ssrn.com/abstract=1919305 or http://dx.doi.org/10.2139/ssrn.1919305

Rafael Salas-Pérez

University of Birmingham - Birmingham Business School ( email )

Edgbaston Park Road
Birmingham, B15 2TY
United Kingdom
+57 3003023331 (Phone)

HOME PAGE: http://https://www.linkedin.com/in/rysalas-pro

Universidad Tecnológica de Bolívar ( email )

Manga Calle del Bouquet
Campus de Ternera, Parque Industrial y Tecnológico
Cartagena, Bolívar
Colombia
+57 3003023331 (Phone)

HOME PAGE: http://https://www.linkedin.com/in/rysalas-pro

Juan Gutiérrez Ruiz

Universidad de Valencia ( email )

Valencia
Spain

Ignacio Velez-Pareja (Contact Author)

Grupo Consultor CAV Capital Advisory & Valuation ( email )

Ave Miramar # 18-93 Apt 6A
Cartagena
Colombia
+573112333074 (Phone)

HOME PAGE: http://cashflow88.com/decisiones/decisiones.html

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