Investor Taxation, Firm Heterogeneity and Capital Structure Choice

Arbeitspapier

We analyze the effect of investor level taxes, firm-specific ownership structure and firm-specific payout policy on firms' capital structure choice. Our analysis is based on data for 10,983 firms from 13 Central and Eastern European (CEE) countries over the time period 2002-2012. Our results show a significant impact of the net tax benefit of debt on the debt ratio of firms. Ignoring firm heterogeneity, an increase in the net tax benefit of debt by 10 percentage points leads to an increase in the debt ratio of 2.49 percentage points. Taking into account investor-level taxation and firm heterogeneity, an increase in the net tax benefit of debt of 10 percentage points leads to an increase in the debt ratio of only 1.27 percentage points, if the firm's largest individual domestic owner has more than 50% of the shares. If all individual domestic owners together have more than 50% of the shares, an increase in the net tax benefit of debt of 10 percentage points leads to a negligible increase in the debt ratio of 0.05 percentage points.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 6098

Classification and Topics

• Classification: Wirtschaft ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes ; Business Taxes and Subsidies including sales and value-added (VAT) ; Fiscal Policies and Behavior of Economic Agents: Firm
• Subject: financing policy ; debt ratio ; tax benefit ; firm ownership ; firm heterogeneity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Haring, Magdalena ; Niemann, Rainer ; Rünger, Silke
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/147352
• Last update: 10.03.2025, 11:43 AM CET