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Taxes Depress Corporate Borrowing: Evidence from Private Firms
[Arbeitspapier]
Körperschaftlicher Herausgeber
Institut für Höhere Studien (IHS), Wien
Abstract We re-examine the relation between taxes and corporate leverage, using variation in state corporate income tax rates. In contrast with prior research, we document that corporate leverage increases following tax cuts for both privately held and publicly listed firms. We use an estimated dynamic equili... mehr
We re-examine the relation between taxes and corporate leverage, using variation in state corporate income tax rates. In contrast with prior research, we document that corporate leverage increases following tax cuts for both privately held and publicly listed firms. We use an estimated dynamic equilibrium model to show that tax cuts result in lower default spreads and more distant default thresholds. These effects outweigh the loss of benefits from the interest tax deduction and lead to higher leverage, especially for privately held firms. Overall, debt tax shields appear to be a secondary capital structure consideration.... weniger
Thesaurusschlagwörter
Besteuerung; Verschuldung; Körperschaftsteuer; Steuersenkung; Privatunternehmen; Unternehmen
Klassifikation
Öffentliche Finanzen und Finanzwissenschaft
Volkswirtschaftstheorie
Sprache Dokument
Englisch
Publikationsjahr
2021
Erscheinungsort
Wien
Seitenangabe
49 S.
Schriftenreihe
IHS Working Paper, 32
Status
Veröffentlichungsversion; begutachtet