Financial Leverage and Corporate Taxation: Evidence from German Corporate Tax Return Data

Dwenger, Nadja; Steiner, Viktor

doi:10.2139/ssrn.1430911

Cited by 14 publications

(11 citation statements)

References 45 publications

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“…For long-term loans, they find an opposite, negative effect. Dwenger and Steiner (2009) estimate the impact of effective CIT rates on the financial leverage of German corporations on the basis of a pseudo-panel, constructed from corporate tax returns. Endogeneity of the effective CIT rate is controlled for by an instrumental variable, obtained from a microsimulation model of the corporate sector.…”

Section: Marginal Tax Rates and Debt Levelsmentioning

confidence: 99%

The Tax Elasticity of Corporate Debt: A Synthesis of Size and Variations

Mooij

2011

IMF Working Papers

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Although the empirical literature has long struggled to identify the impact of taxes on corporate financial structure, a recent boom in studies offers ample support for the debt bias of taxation. Yet, studies differ considerably in effect size and reveal an equally large variety in methodologies and specifications. This paper sheds light on this variation and assesses the systematic impact on the size of the effects. We find that, typically, a one percentage point higher tax rate increases the debt-asset ratio by between 0.17 and 0.28. Responses are increasing over time, which suggests that debt bias distortions have become more important.

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Section: Marginal Tax Rates and Debt Levelsmentioning

confidence: 99%

The Tax Elasticity of Corporate Debt: A Synthesis of Size and Variations

Mooij

2011

IMF Working Papers

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“…3 For a discussion of the deadweight loss caused by personal income taxation, see Feldstein (1999), Giertz (2009), and Saez, Slemrod, and Giertz (forthcoming). 4 For example, one way corporations can react to changes in the CIT is by adjusting their debt ratio, which explains approximately one-third of the change in the corporate tax base induced by tax changes (Dwenger and Steiner, 2009).…”

Section: Introductionmentioning

confidence: 99%

Profit Taxation and the Elasticity of the Corporate Income Tax Base: Evidence from German Corporate Tax Return Data

Dwenger¹,

Steiner²

2012

NTJ

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This paper estimates the elasticity of corporate taxable income with respect to the average corporate tax rate. To control for the endogeneity of the tax rate, we use an instrumental variable approach, calculating the counterfactual average tax rate that a corporation would have faced in a particular period had there been no endogenous change in corporate profi ts. This counterfactual rate is derived from a microsimulation model based on tax return data. A statistically signifi cant and relatively large point estimate of the tax base elasticity implies that a reduction in the statutory corporate tax rate would reduce corporate tax receipts less than proportionally.

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“…N. Dwenger and V. Steiner (2014) [21] studied the impact of profit taxation on the financial leverage of firms. The dataset consists of comprehensive corporate tax return data of German firms for the period 1998-2001.…”

Section: Literature Reviewmentioning

confidence: 99%

The Impacts of Taxation on Capital Structure in BRICS Countries

Chakrabarti

Gruzin

2020

КФ

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Capital structure is an indicator of the value of a firm and is a key performance indicator concerning how efficiently a company operates. Debt and leverage influence a company’s investment risks and influence the rate of return required by investors. Therefore, decisions affecting capital structure choice have crucial long-term effects. The aim of this study is to determine the effects of corporate tax rates on capital structure in public nonfinancial companies based in BRICS countries. The specific object of our analysis is the evaluation of financial leverage as a proportion of debt financing based on the amount of total assets. This analysis is carried out on a sample of BRICS companies over the period from 2010 to 2015. To conduct this research, panel data regression models are employed, including the fixed effects (FE), random effects (RE) and generalised method of moments (GMM) models. Each BRICS country is analysed separately in order to avoid biased estimates due to a host of significant country-specific differences. The results presented herein indicate that effective tax rate is statistically significant, but the effect of taxation varies across countries. For example, effective tax rate is an important capital structure determinant, and it is significant across all countries. However in analytical terms, this investigation reveals that the most suitable regression model for the majority of BRICS countries is the fixed effects method, although for Russia the most appropriate model is the random effects method. To summarise, three separate hypotheses regarding the interplay of taxation and capital structure have. This research crucially serves to demonstrate facets of the complexity of the economic situation in the key economies of BRICS countries. The generally-supported hypothesis implies that the higher the corporate tax rate, the more tax benefits the company receives from using a tax shield. The results of this study indicate that contrary to most existing literature, effective tax rate has a negative relationship with the capital structure in Russia, India and South Africa. Moreover, various existing research studies in the field have been validated, and individual aspects of our results serve to alternatively validate the tradeoff and the pecking order theories. The conclusions presented herein regarding the complexities of the interplay between economic indicators between BRICS countries will be essential information in the commercial and academic spheres and anyone concerned with emerging economies.

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Financial Leverage and Corporate Taxation: Evidence from German Corporate Tax Return Data

Cited by 14 publications

References 45 publications

The Tax Elasticity of Corporate Debt: A Synthesis of Size and Variations

The Tax Elasticity of Corporate Debt: A Synthesis of Size and Variations

Profit Taxation and the Elasticity of the Corporate Income Tax Base: Evidence from German Corporate Tax Return Data

The Impacts of Taxation on Capital Structure in BRICS Countries

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