Capital Structure and Taxes in Europe
61 Pages Posted: 28 Mar 2017 Last revised: 20 Jun 2017
Date Written: June 15, 2017
This paper studies the impact of taxes on capital structure in Europe. We find that leverage ratios vary with personal tax rates but issuance choices do not. We find no evidence that capital structure is sensitive to corporate tax rates and no evidence that leverage ratios respond to dividend tax rate changes that arise from a plausibly exogenous court ruling that forced several countries to abandon imputation tax systems. We do, however, find that firms reduce dividend payouts when the tax on dividends increases.
Keywords: capital structure, taxes, europe, payout policy
JEL Classification: G32, G35
Suggested Citation: Suggested Citation