Interest Barrier and Capital Structure Response

53 Pages Posted: 25 Feb 2015 Last revised: 1 Jun 2016

See all articles by Stephan Alberternst

Stephan Alberternst

University of Paderborn

Caren Sureth-Sloane

Paderborn University; Vienna University of Economics and Business

Date Written: 2015


The Organisation for Economic Co-Operation and Development (OECD) recently proposed an interest barrier to fight tax base erosion and profit shifting (BEPS). We use the introduction of such an interest deductibility restriction in Germany as a quasi-experiment and find significant corporate capital structure responses. Using single entity financial statements and a detailed matching approach, we find evidence that companies that are affected by the interest barrier reduce their leverage by 4.7 percentage points more than non-affected companies. The effects are stronger among non-financially constrained firms. Our results imply that interest barrier effects on capital structure have so far been heavily underestimated.

Keywords: Financing decisions, German tax reform, interest barrier, leverage

JEL Classification: F34, H21, H24

Suggested Citation

Alberternst, Stephan and Sureth-Sloane, Caren, Interest Barrier and Capital Structure Response (2015). WU International Taxation Research Paper Series No. 2015-09, Available at SSRN: or

Stephan Alberternst (Contact Author)

University of Paderborn ( email )

Warburger Str. 100
Paderborn, D-33098

Caren Sureth-Sloane

Paderborn University ( email )

Warburger Str. 100
Paderborn, 33098

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics