Value of Debt Tax Shields in Colombia: An Empirical Study
28 Pages Posted: 31 Aug 2011 Last revised: 9 Nov 2011
Date Written: July 28, 2011
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 It shows that this value represents on average between 5.40% and 56.73% out of total firm value depending on discount rate for tax shields and calculation method. It also finds that firms’ average leverage is low relative to other countries. Using Data Panel regressions, it explores the behavior of total value of firms and found no evidence that debt creates value.
Keywords: Debt Tax Shields, Discount Rates, Firm Value, Leverage, Colombia
JEL Classification: G12, G32, M21, M41
Suggested Citation: Suggested Citation