Taxes and Corporate Financing Decisions – Evidence from the Belgian ACE Reform

Arbeitspapier

We contribute to the empirical literature on the debt bias of corporate income taxation through a micro-econometric evaluation of the so-called ACE corporate tax reform in Belgium based on firm-level accounting data. We interpret the tax reform that came into effect in January 2006 as an economic quasi experiment. We identify its causal impact on the leverage ratio of Belgian corporations by means of a difference-in-differences (DiD) approach, using corporations from the UK as comparison group. Our results document that the ACE reform led to a systematic pattern of heterogeneous effects on the capital structure of Belgian corporations, as the estimated reduction of the leverage ratio is most pronounced for big firms. Estimation of quantile treatment effects further reveals that reform effects get monotonically larger across the distribution of firm leverage. Finally, we provide evidence of sectoral heterogeneity with significant effects observed for capital-intensive, but not for labor-intensive sectors.

Object Details

• ISBN: 978-3-86788-610-9
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Ruhr Economic Papers ; No. 533

Classification and Topics

• Classification: Wirtschaft ; Business Taxes and Subsidies including sales and value-added (VAT) ; Fiscal Policies and Behavior of Economic Agents: Firm ; Taxation and Subsidies: Incidence ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Corporate Finance and Governance: Government Policy and Regulation
• Subject: corporate income taxation ; financial structure ; debt bias ; allowance for corporate equity ; difference-in-differences

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): aus dem Moore, Nils
• Event: Veröffentlichung
• (who): Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI)
• (where): Essen
• (when): 2014

Further information

• DOI: doi:10.4419/86788610
• Handle: http://hdl.handle.net/10419/107693
• Last update: 10.03.2025, 11:42 AM CET