Taxes do affect corporate financing decisions: The case of Belgian ACE

Arbeitspapier

In this paper, I use difference-in-differences regressions to measure how the debt tax shield affects the capital structure of a company. By comparing the financial leverage of treatment and control companies before and after the introduction of an equity tax shield, I infer the impact of the tax discrimination between debt and equity. Consistent with the theoretical prediction, the estimated results show that the introduction of an equity tax shield has a significant negative effect on the financial leverage of a company. This effect amounts to approximately 2-7%, meaning that a classical tax system encourages companies to use on average 2-7% more debt than when there is an equal tax treatment of debt and equity.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 3713

Classification and Topics

• Classification: Wirtschaft ; Corporate Finance and Governance: General ; Business Taxes and Subsidies including sales and value-added (VAT) ; Tax Law
• Subject: allowance for corporate equity ; corporate financing decisions ; Kapitalstruktur ; Entscheidung ; Unternehmensbesteuerung ; Eigenkapital ; Steuerliches Anrechnungsverfahren ; Steuerwirkung ; Belgien

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Princen, Savina
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/55334
• Last update: 10.03.2025, 11:44 AM CET