Corporate tax-shields and capital structure: leveling the playing field in debt vs equity finance

Cao, Yifei; Whyte, Kemar

doi:10.1080/1351847x.2022.2158112

Cited by 5 publications

(2 citation statements)

References 53 publications

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“…In this context, it suggests that firms may strategically use debt to reduce their tax liabilities, which is supported by the negative coefficient for capital structure. Similar results were reported by Cao and Whyte (2023) and Ifeoma and Meshack (2018).…”

Section: Empirical Analysissupporting

confidence: 91%

“…Various studies, e.g., Cao and Whyte (2023), have explored the impact of capital structure on tax planning, finding that firms may leverage debt to reduce their tax liabilities. In contrast, Bui et al (2023) suggested that tax-shield benefits are balanced with potential financial distress costs, necessitating an optimal capital structure.…”

Section: Literature Review and Hypothesis Formulationmentioning

confidence: 99%

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The Influence of Capital Structure on Corporate Effective Tax Rates of Listed Firms in Tanzania

R.P.,

H.,

et al. 2024

African Journal of Accounting and Financial Research

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This study examines the relationship between capital structure and corporate effective tax rates using data from 25 randomly selected listed firms on the Dar es Salaam Stock Exchange over a ten-year span (2013–2022). We employed a random fixed effect panel regression model while controlling for firm-specific variables such as size, profitability, age, and growth. The study reveals a significant and negative relationship between capital structure and effective tax rates, implying that firms utilising higher debt financing tend to experience lower effective tax rates. Additionally, firm size and profitability exhibit a significant relationship with capital structure. These findings hold significant implications for Tanzanian businesses, suggesting that they may enhance tax efficiency through strategic capital structure decisions. For policymakers, the results provide empirical insights on potential tax policy reforms, potentially fostering a more favourable business environment in Tanzania. This research contributes empirical evidence on the financial and tax dynamics of listed firms in Tanzania.

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Section: Empirical Analysissupporting

confidence: 91%

Section: Literature Review and Hypothesis Formulationmentioning

confidence: 99%