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Corporate taxation, debt financing and foreign-plant ownership

Journal
European Economic Review
ISSN
0014-2921
ISSN-Digital
1873-572X
Type
journal article
Date Issued
2010-01-01
Author(s)
Egger, Peter
Eggert, Wolfgang
Keuschnigg, Christian  
Winner, Hannes
DOI
10.1016/j.euroecorev.2009.06.007
Abstract
This paper compares domestically and foreign-owned plants with respect to their debt-to-assets ratio and analyzes to which extent the difference is systematically affected by corporate taxation. To derive hypotheses about influence of corporate taxation on a firm's debt financing we adapt a standard model of taxation and financing decisions of firms for the case of international debt shifting activities of foreign-owned firms. We estimate the average difference between a foreign-owned and a domestically owned firm's debt ratio, treating the mode of ownership as endogenous. Using data from 32,067 European firms, we find that foreign-owned firms on average exhibit a significantly higher debt ratio than their domestically owned counterparts in the host country. Moreover, this gap in the debt ratio increases with the host country's statutory corporate tax rate.
Language
English
Keywords
Corporate taxation
Multinational firms
Financial structure
Debt shifting
Propensity score matching
HSG Classification
contribution to scientific community
Refereed
No
Publisher
Elsevier
Publisher place
Amsterdam
Volume
54
Number
1
Start page
96
End page
107
Pages
12
URL
https://www.alexandria.unisg.ch/handle/20.500.14171/96921
Subject(s)

economics

Division(s)

SEPS - School of Econ...

University of St.Gall...

FGN - Institute of Ec...

Eprints ID
51219
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