Taxation and Capital Structure Choice - Evidence from a Panel of German Multinationals

18 Pages Posted: 7 Oct 2006

See all articles by Thiess Buettner

Thiess Buettner

Ifo Institute for Economic Research; CESifo (Center for Economic Studies and Ifo Institute); Ludwig-Maximilians University of Munich

Michael Overesch

Universität zu Köln

Ulrich Schreiber

University of Mannheim - Department of Business Administration and Taxation; Centre for European Economic Research (ZEW)

Georg Wamser

University of Tuebingen; ETH Zurich

Multiple version iconThere are 2 versions of this paper

Date Written: 2006

Abstract

This paper analyzes the impact of taxes and lending conditions on the financial structure of multinationals' foreign affiliates. The empirical analysis employs a large panel of affiliates of German multinationals in 26 countries in the period from 1996 until 2003. In accordance with the theoretical predictions, the effect of local taxes on leverage is positive for both types of debt. Moreover, while adverse local credit market conditions are found to reduce external borrowing, internal debt is increasing, supporting the view that the two channels of debt finance are substitutes.

Keywords: Corporate Income Tax, Multinationals, Capital Structure, Firm-Level Data

JEL Classification: H25, H26, G32

Suggested Citation

Buettner, Thiess and Overesch, Michael and Schreiber, Ulrich and Wamser, Georg, Taxation and Capital Structure Choice - Evidence from a Panel of German Multinationals (2006). ZEW Discussion Paper No. 06-067. Available at SSRN: https://ssrn.com/abstract=935219 or http://dx.doi.org/10.2139/ssrn.935219

Thiess Buettner (Contact Author)

Ifo Institute for Economic Research ( email )

Poschingerstr. 5
Munich
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Ludwig-Maximilians University of Munich

Geschwister-Scholl-Platz 1
Munich, Bavaria 80539
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/

Ulrich Schreiber

University of Mannheim - Department of Business Administration and Taxation ( email )

D-68131 Mannheim
Germany
+49 621 181 1718 (Phone)
+49 621 181 1716 (Fax)

Centre for European Economic Research (ZEW)

D-68161 Mannheim
Germany

Georg Wamser

University of Tuebingen ( email )

Wilhelmstr. 19
72074 Tuebingen, Baden Wuerttemberg 72074
Germany

ETH Zurich ( email )

Weinbergstr. 35
Zurich, 8003
Switzerland

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