The impact of personal and corporate taxation on capital structure choices


Overesch, Michael ; Voeller, Dennis


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URL: http://ub-madoc.bib.uni-mannheim.de/1947
URN: urn:nbn:de:bsz:180-madoc-19471
Document Type: Working paper
Year of publication: 2008
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: G30 G32 H24 H25 ,
Subject headings (SWD): Kapitalstruktur , Unternehmungssteuer , Einkommensteuer , Körperschaftsteuer , Fremdkapital , Steuerwirkung , Europäische Union
Keywords (English): Capital Structure, Corporate Income Tax, Personal Income Tax, Firm-Level Data
Abstract: This paper empirically analyses whether both personal and corporate taxation have an impact on companies' capital structure decisions. We investigate the effect of the difference in taxation of debt and equity financing on capital structures. Our empirical results, based on a comprehensive panel of European firm-level data, suggest that a higher tax benefit of debt has the expected significant positive impact on a company's financial leverage. Particularly, we find evidence that the capital structures of smaller companies respond more heavily to changes in the tax benefit of debt. Additional analysis confirms that not only corporate taxes are relevant for corporate financial planning, but variation in capital income tax rates at the shareholder level implicates significant capital structure adjustments as well. Moreover, we find substitutive relationships between non-debt tax shields and the effect of the corporate tax rate on capital structures.
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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Overesch, Michael ; Voeller, Dennis (2008) The impact of personal and corporate taxation on capital structure choices. Open Access [Working paper]
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