No full-text available
To read the full-text of this research,
you can request a copy directly from the author.
Debt and the Marginal Tax Rate
Abstract
Do taxes affect corporate debt policy? This paper tests whether the incremental use of debt is positively related to simulated firm-specific marginal tax rates that account for net operating losses, investment tax credits, and the alternative minimum tax. The simulated marginal tax rates exhibit substantial variation due to the dynamics of the tax code, tax regime shifts, business cycle effects, and the progressive nature of the statutory tax schedule. Using annual data from more than 10,000 firms for the years 1980–1992, I provide evidence which indicates that high-tax-rate firms issue more debt than their low-tax-rate counterparts.
... Capital structure theory suggests that taxes could be one key reason why firms choose to increase their leverage by debt-financing their payouts: Issuing debt allows firms to minimize their tax bill because interest payments can be deducted from taxable income; paying out the debt-issuance proceeds ensures that the taxable interest income that would be generated if firms retained the proceeds as cash (Azar, Kagy, and Schmalz (2016) The rates we report are based on the after-interest-deduction marginal federal corporate income tax rate estimates described in Graham (1996) and updated in Prof. Graham's website, to which we add state tax rates following Graham (2000). We observe similar tax rate patterns for debt-financed dividends. ...
... For each firm-year, the variable Tax increase at t−1 (in %) measures corporate income tax increases in the firm's headquarter state that took effect during the prior year (like Heider and Ljungqvist (2015), we allow firms to respond to tax changes with a one-year lag); specifically, this variable equals zero if the state did not enact a corporate income tax increase, it equals 0.01 if it enacted a one percentage point tax increase, etc. The remaining independent variables follow Heider and Ljungqvist (2015) and are defined in Internet Appendix A. The sample in columns 1 and 2 includes all public firms except those with zero after-interest-deduction marginal corporate income tax rate in year t −1 (according to Graham's (1996) estimates, updated in his website), as only firms with profits to shield from tax have incentives to increase their leverage when taxes increase. In columns 3 and 4, we report the results of placebo tests that include only those firms with zero after-interest-deduction marginal tax rate in year t −1. ...
We find that 43% of firms that make payouts also raise capital during the same year, resulting in 31% of aggregate payouts being externally financed, primarily with debt. Most financed payouts cannot be explained by payout smoothing in response to volatile earnings or investment (rather, they are the result of firms persistently setting payouts above free cash flow). In fact, 25% of aggregate payouts could not have been paid without the firms simultaneously raising capital. Profitable firms with moderate growth use debt-financed payouts to jointly manage their leverage and cash, thus highlighting the close relationship between payout and capital structure decisions.
... They showed how profitability mitigates internal conflicts and fosters favorable financing conditions, enabling increased investment capabilities. Graham (1996) Almeida and Campello (2007) demonstrated that tangible assets and repayment capacity contribute to financing. Ozkan (2001) proposed that a positive repayment capacity allows for adjustments in capital structure to accommodate substantial investments. ...
... Ozkan (2001) proposed that a positive repayment capacity allows for adjustments in capital structure to accommodate substantial investments. Graham (1996) emphasized that a robust repayment capacity encourages borrowing for investments, particularly for SMEs, where repayment capacity determines investment scope and builds lender trust. High debt hinders investment due to risk perception (Cheryta et al., 2018), limiting borrowing (Hovakimian et al., 2004), affecting strategic flexibility (Stewart, 1991). ...
This research seeks to identify the factors influencing the investment potential of SMEs following their receipt of government-guaranteed loans. To this end, an empirical methodology based on the statistical analysis of data collected from a representative sample of Moroccan companies was employed. This sample of 335 SMEs that had benefited from loans with government guarantees was selected at random to ensure its relevance to the population of SMEs in Morocco. The methodological approach is based on a regression analysis using the robust least squares (RLS) method. Firm profitability is positively related to higher investment, suggesting that government guarantees should encourage investment by profitable SMEs. Liquidity, repayment capacity and indebtedness at the time of applying for finance do not appear to influence investment. These elements can be improved after financing, which indicates that government guarantees should not penalize SMEs in difficulty. Decision-making maturity has a negative effect on investment, suggesting that young companies and entrepreneurs tend to invest more. A negative correlation is observed between company size and investment, which suggests that government guarantees should be geared towards small SMEs and young companies and entrepreneurs. Finally, managers with a large share of capital invest more, leading us to believe that government guarantees should favor this type of SME.
... Neste contexto, vários estudos procuraram avaliar se a forma de financiamento corporativo impacta ou não no seu valor. A maior parte destes estudos emergiu de pesquisas relacionadas ao índice de endividamento de empresas (Graham, 1996;Rajan & Zingales, 1995;Titman & Wessels, 1988) e formas de financiamento corporativos, (Bayless & Chaplinsky, 1990;Harris & Raviv 1991;Jalilvand & Harris, 1984;Jung et al., 1996;Marsh, 1982;;Mackie-Mason, 1990;,). Estes autores evidenciaram duas significativas contribuições teóricas: a Teoria do pecking order e a Teoria do trade-off. ...
... Os resultados desta pesquisa reforçam os argumentos de Myers (1977), que defendeu uma relação negativa entre as medidas de rentabilidade passadas e os níveis atuais de endividamento. Na mesma lógica, Graham (1996) investigou o nível de endividamento e a taxa marginal e forneceu evidências de que empresas com altas taxas de imposto emitem mais dívidas quando comparadas a empresas com baixas taxas de imposto. ...
Objetivo: Analisar o efeito do desempenho de mercado nas decisões de financiamento corporativo moderado pelo desvio da dívida-alvo. Método: O delineamento metodológico encaminhou-se para uma pesquisa descritiva, documental e quantitativa. As empresas estudadas são brasileiras, não financeiras listadas na Bolsa Balcão Bovespa (B3), totalizando 764. Os dados correspondem ao lapso temporal de 2008-2017. Para análise, foram empregadas técnicas estatísticas como exemplo o modelo de regressão probit. Originalidade/Relevância: A inovação desta pesquisa está na abordagem do desvio da dívida-alvo e sua relação com o desempenho de mercado e as decisões de financiamento corporativo. Embora a teoria de trade-off de Myers (1984) já tenha sido proposta, a pesquisa investiga como o mercado não está percebendo esse desvio, resultando em uma possível anomalia nas escolhas entre emissão de ações e captação de dívidas por empréstimos e financiamentos, afetando o nível ótimo de endividamento. Resultados: Os achados dessa pesquisa propõem implicações relevantes para literatura de finanças, principalmente a proposta por Myers (1984) na linha trade off, pois o mercado não está percebendo o desvio da dívida-alvo, e como consequência, pode ocorrer uma anomalia na escolha entre emissão de ações e a captação de dívidas por empréstimos e financiamentos o que prejudica o nível ótimo de endividamento.Contribuições teóricas/metodológicas/práticas: O estudo elucida que as empresas precisam considerar atentamente suas necessidades de financiamento, levando em conta o impacto do desvio da dívida-alvo nas opções de captação de recursos. Uma abordagem mais consciente e fundamentada pode resultar em uma estrutura de capital mais equilibrada, possibilitando uma tomada de decisão mais sólida.
... Tax-based incentives for sponsors to contribute could be captured by other proxies. These include estimates of corporate marginal tax rates (Graham, 1996a(Graham, , 1996b and measures of tax exposure based on sponsor tax credits such as net operating loss carryforwards and investment tax credits. 30 According to the latter set of proxies, a firm is not exposed to tax-based incentives if its accumulated tax credits are large enough to cause it not to report any taxable income. ...
We evaluate the impact of the 2017 Tax Cuts & Jobs Act (TCJA) pension tax break on sponsor contributions to defined-benefit retirement plans. We exploit cross-sectional variation in ex-ante exposure to the tax break. We find that the tax break induced an extra $2.8 billion of sponsor contributions to medium- and large-scale plans in 2017. However, we find strong evidence of reversal, both in terms of sponsor contributions and plan funding ratios by 2018. Our contributions model indicates that this reversal is consistent with more binding financial constraints in 2018 relative to 2019. Our results suggest that the TCJA did not have a long-lasting impact on corporate defined-benefit pension funds.
... Third, we consider changes in capital structure, i.e., changes in the composition of firms' outside financing (e.g., changes in ownership). Capital structure and its association with the ETR have received considerable attention in the literature (e.g., Givoly et al. 1992;Graham 1996;Graham et al. 1998). Changes in capital structure are likely to result in increases in ETR if firms shift from debt to equity financing, thus reducing interest expense deductions and increasing taxable income. ...
Previous studies have shown that qualitative disclosure contains information that facilitates the assessment of future firm outcomes. We first connect to this literature on early signals by showing that qualitative disclosure also specifically contains information about future ETR as one relevant firm outcome. Using the tax footnote from 10-K filings of all publicly traded U.S. firms over the period from 2000 to 2021, we show that year-over-year tax footnote modifications are an early signal of impending changes in ETR. When specifically considering the timeliness of this signal, we find that tax footnote modifications are associated with future changes in ETR at least three years in advance. Second, we investigate, as our main focus of analysis, asymmetry in timeliness. Here, we find that tax footnote modifications preceding increases in ETR occur relatively earlier (and are greater) than do (are) tax footnote modifications preceding decreases in ETR. We additionally use word lists to directly identify relevant underlying processes for changes in ETR and to investigate asymmetric timeliness conditional on the underlying process. Overall, our results indicate that firms strategically manage their tax disclosure in accordance with the ”accounting conservatism” hypothesis proposed by Basu (1997).
... This approach addresses the limitations of indirect methods (such as variations in statutory tax rates, marginal tax rates, and other tax statuses) used in prior studies, which have often produced inconclusive findings regarding the relationship between tax benefits and capital structure. 10 Previous studies, including those by MacKie-Mason (1990), Graham (1996a), Graham (1996b), and Van Binsbergen et al. (2010), have found a positive relationship between tax rates and leverage. However, others, such as Bradley et al. (1984), Titman and Wessels (1988), and Fama and French (1998), did not establish a positive link between measures of tax status (such as non-debt tax shields and profitability) and leverage. ...
This study scrutinizes the effects of Indonesia's 2016 debt-to-equity cap reform (thin capitalization rule) on capital structure , highlighting the role of debt tax benefits. The reform curtails debt tax benefits and furnishes a quasi-experimental setting, allowing a comparison between firms affected by the reform and those unaffected. Focusing on private firms and employing an entropy balancing weighted difference-indifference approach, we elucidate that the reform results in a substantial 9.7 percentage point reduction in the debt ratio and a 5.3 percentage point increase in the stock ratio. Additionally , utilizing a pseudo tax cut reform framework combined with an isolated impact of the zero marginal debt tax benefit, we identify an implied tax elasticity of debt around 0.88, contributing to the observed decline in the debt ratio. Notably, smaller firms exhibit a more pronounced response, and the stock ratio undergoes a significant metamorphosis, suggesting the need for nuanced policy adjustments. Overall, the study underscores the profound influence of debt tax benefits in shaping corporate financing decisions.
... Specifically, we control for firm size (Size) and firm profitability (ROA), because larger or more profitable firms typically have more slack resources and are less likely to engage in tax avoidance activities (Rego, 2003;Huang et al., 2016). Firm leverage (Leverage) is controlled to capture the effect of tax shield on debt, where higher corporate tax shields reduce the incentives for incremental tax planning (Graham, 1996;2000). ...
Purpose: The purpose of this study is to examine the effect of terrorist attacks on tax avoidance. Further, we identify the possible channel leading to our main result and examine the role of social pressure.
Design/methodology/approach: Data pertaining to terrorist attacks within the U.S. are procured from the Global Terrorism Database (GTD). The final sample consists of 45,524 firm-year observations from 1993 to 2017. The methodology uses ordinary least squares regressions.
Findings: We find that firms located in close proximity to terrorist attacks (i.e., impact firms) significantly decrease their tax avoidance practices after the attacks. We further find that these impact firms are willing to pay more taxes post-attack when their headquarters are located in higher social capital regions.
Originality: Studies have mainly focused on the macroeconomic effects of terrorism, and only recently have researchers shifted their focus to firm-level impacts. We provide strong evidence that extends the second line of the literature by exploring corporate tax activities attributed to terrorist events.
... Key factors influencing optimal capital structure include depreciation deductions, operating losses and tax credits (DeAngelo & Masulis, 1980;Graham, 1996;Mackie-Mason, 1990). Companies with volatile cash flows or higher systematic risk should opt for less debt (Booth et al., 2001). ...
This study investigates the impact of the Insolvency and Bankruptcy Code (IBC) on the capital structure speed of adjustment (SOA) of Indian firms. The IBC, introduced in 2016, significantly enhanced creditors’ rights and streamlined the bankruptcy process, providing a quasi-natural experiment to assess its influence on firms’ leverage dynamics. Utilising a panel data methodology and propensity score matching-based difference-in-differences (PSM-DID) regression; we categorise firms into over-leveraged (treatment) and under-leveraged (control) groups. Our findings reveal that the IBC significantly increased the SOA for over-leveraged firms, compelling them to reduce debt levels swiftly to avoid financial distress and bankruptcy. Conversely, under-leveraged firms exhibited a decreased SOA, reflecting a strategic shift towards financial stability over leveraging benefits. These results underscore the critical role of regulatory frameworks in shaping corporate financial strategies and align with the dynamic trade-off theory, highlighting firms’ active adjustment towards optimal capital structures. The study contributes to the literature on capital structure SOA by providing insights into how legal and institutional changes in an emerging market influence corporate financial behaviour, with significant implications for policymakers, regulators, and corporate executives.
... Tỷ lệ thuế có mối quan hệ thuận chiều với nợ vay, bởi vì các công ty có thể tận dụng lợi thế từ lá chắn thuế, giúp giảm chi phí tài chính thực tế của doanh nghiệp. Kết quả này cũng được tìm thấy trong nghiên cứu của Graham (1996) ...
... Kraus and Litzenberger (1973) chứng minh được rằng khi chi phí phá sản kỳ vọng tăng sẽ làm giảm mức độ sử dụng nợ trong công ty (tăng linh hoạt nợ). Nghiên cứu của Graham (1996) và nghiên cứu của Titman and Wessels (1988) chỉ ra rằng các công ty có mức thuế suất cao thường sử dụng nợ cao để tận dụng lá chắn thuế, ngược lại những công ty có mức tiết kiệm thuế từ khấu hao tài sản cố định cao lại sử dụng nợ thấp. Nghiên cứu của Rajan and Zingales (1995) và nghiên cứu của Barclay et al. (2006) chứng minh rằng tỷ số nợ có ảnh hưởng ngược chiều đến tăng trưởng của các công ty. ...
The objective of research is to clarify the impact of financial flexibility on company’s value of non-financial joint- stock companies listed on the Vietnam’s Stock Market with the moderating variable of systematic risk and the control variable of the financial performace and compan’s value. The panel feasible generalized least squares regression (FGLS) is applied in this research with supporting of the 17 Stata software. The research sample consists of 633 non-finan- cial joint- stock companies in the period from the first quarter of 2021 to the first quarter of 2023. The research pointed out that the financial flexi- bility, cash flexibility and debt flexibility affect positively the non-financial company’s value list- ed on the Vietnam’s Stock Market at the signifi- cant level of 1 percent. Moreover, the result of research is stated that the financial performance and past value of company have significantly positive on company’s value. Finally, the research also proved that the systematic risk makes decrease the positive impact of financial flexibility on company’s value. Based on the research result, some recommendations are given for companies in maintaining financial flexibility to enhance the company value.
... In their pioneering work, Altman (1968) and Ohlson (1980) use backward-looking accounting information and point to vulnerabilities in a listed firm's health and default risk. Scholars more recently measure financial distress likelihood (FDL) based on Altman's (1968) Z-score model (Graham, 1996;Leary and Roberts, 2005;Sardo et al., 2022), in line with static capital structure theory. Most recently, Singh and Rastogi (2022) investigate the financial distress of listed SMEs in India during the COVID-19 period. ...
Purpose
This study investigates the impact of temporary employment on various forms of financial distress for firms during the COVID-19 pandemic.
Design/methodology/approach
The authors apply a logit model to evaluate the differences in the probabilities of experiencing financial distress for firms with or without temporary reemployment and for firms with different intensities of temporary workers. As an additional test, an ordinal logistic model is applied to reflect different degrees of financial distress.
Findings
Our main results indicate that firms with temporary employment are more likely to experience financial distress than firms without temporary employment, regardless of the severity of financial distress. Among firms with temporary employment, our analysis suggests that a firm’s likelihood of experiencing financial distress depends on its relative share (quantile) of temporary workers.
Practical implications
Our findings provide valuable insights for evaluating the impact of temporary employment on firms’ vulnerability during the COVID-19 crisis and suggest strategies for firms to enhance resilience to similar future crises.
Originality/value
Our study is the first one that explores the relationship between temporary employment and financial distress. Firms around the world have been pursuing flexible labor to improve resilience and firm performance. The pandemic may further ramify this trend, creating a future “new normal” regarding employment relationships, job segmentation and gender equality in the job market. This article adds a new dimension to the evaluation of the new normal, which may help firms evaluate the consequences of temporary employment, especially in times of crisis.
... Trade-off theory of capital structure suggests that firms have a target level of capi-tal structure, which is set based on the trade-off of benefits and costs of debt financing. For instance, debt financing increases corporate tax saving (Graham, 1996;Korteweg, 2010) and intensifies external monitoring from debt investors (Berger et al., 1997;Morellec et al., 2012). While these benefits motivate firms to increase the leverage through debt financing, debt financing also comes with increased default risk, interest payment, and intensified debtholder-shareholder conflicts (Jensen and Meckling, 1976). ...
This paper examines how negative publicity influences firms’ capital structure decision. We find that firms exhibit faster adjustment of capital structure toward the target level after more negative media coverage, advocating the monitoring role of negative media sentiment on corporate behaviors. Further, our finding is significantly stronger for non-chaebol firms. Additional analyses show that the monitoring role is stronger when firms are more scrutinized by outsiders and have better corporate governance. Overall, this paper shows evidence that negative media sentiment could play an effective role in monitoring firms’ capital structure and correcting their inefficiencies.
... Using tests based on incremental decisions, MacKie-Mason (1990: p. 1471) documents that firms facing higher marginal tax rates are more likely to have higher leverage ratios, and that firms with low marginal tax rates will issue more equity relative to debt. Using data from over 10,000 companies, Graham (1996: p. 41) finds a statistically significant positive association between debt ratios and marginal tax rates. Finally, trade-off theory predicts that firms with more taxable income and relatively few nondebt tax shields, such as investment tax credits and depreciation and amortization, will have more incentives to borrow (De Angelo and Masulis 1980: p. 4). ...
This research consists of verifying whether CIT has an effect on capital given the financing risk incurred. A review of several capital theories has shown that CIT is one of the main determinants of a firm's capital structure. The inclusion of CIT in capital structure models continues to divide the world of corporate finance. Debt interest deduction in computing CIT reinforces the controversy over the question of the capital structure that optimizes the tax savings provided by this deduction. The consequence is the existence of two opposing groups on the optimum capital structure: on the one hand, the group of those who believe that there is one and only one optimal capital structure, and on the other, the group of those who reject out of hand any possibility of an optimal capital structure. The sample starts with a case study of two hypothetical identical firms, one indebted and the other non-indebted, with the same profitable investment project over a period of time, and ends with 101 pairs of identical firms belonging to different classes of financing risk. The hypothesis of non-gratuity of cost and income is used, and capital markets are assumed to be pure and perfect. The results confirm that CIT has no effect on the structure, value, cost and return of capital for a given financing risk, and reveal the existence of a third source of financing called "public capital", whose cost is the corporate capital tax rate (CCTR). There is no longer any question of thinking about the optimum capital structure, which is a pure financial illusion. This paper is one of the first to show that CIT does not affect capital, and to propose a model that explains capital structure behavior in the presence of CIT.
... 18 Vgl. Auerbach und Hassett (1991), Cummins, Hassett und Hubbard (1994), S. 43, Hassett und Hubbard (2002 Graham (1996a), Graham (1996b); zur Technik siehe Graham und Lemmon (1998) r it = β i0 + β i1 x r it-1 + β i2 x ∆gdp t + ε it , ε ~ N(0,sd i ). (5)). ...
Wir zeigen, wie sich die fiskalischen Wirkungen einer Steuersatzsenkung, Abschreibungsvergünstigung und Investitionsprämie über einen Zeitraum, der durch eine Ergebniskrise geprägt ist, voneinander unterscheiden. Deutlich wird, dass eine Körperschaftsteuersenkung um fünf Prozentpunkte die finanziellen Entlastungswirkungen der Einführung einer degressiven Abschreibung oder der im Barwert zur Abschreibungsvergünstigung äquivalenten Investitionsprämie um ein Mehrfaches übersteigt. Im Vergleich zur Entlastungswirkung, die die Einführung einer Abschreibungsvergünstigung mit sich bringt, treten die
Entlastungswirkungen einer Investitionsprämie schneller ein und wirken sich auch auf Verlustunternehmen aus, während die Wirkungen einer Steuersatzsenkung und Abschreibungsvergünstigung von den Regelungen der interperiodischen Verlustverrechnung abhängig sind. Die Abstände zwischen der Steuersatzsenkung,
Abschreibungsvergünstigung und Investitionsprämie verkürzen sich, wenn die Investitionswirkungen berücksichtigt werden, die mit diesen Entlastungsmaßnahmen verbunden sind. Dabei hängt die Investitionswirkung einer Investitionsprämie von ihrer Ausgestaltung ab. Wird sie durch eine Kürzung der Anschaffungs- oder Herstellungskosten finanziert, sind die Investitionswirkungen einer im Barwert äquivalenten Investitionsprämie mit denen der degressiven Abschreibung weitgehend deckungsgleich,
wenngleich letztere auch bei Verlustunternehmen Wirkung entfaltet. Wird die Investitionsprämie in Form eines Nettozuschusses geleistet, hat die Investitionsprämie eine über den Begünstigungszeitraum nachhaltigere Wirkung.
... One of the determinants of tax planning is leverage because the interest on borrowed finance is taxdeductible (Graham (1996), as cited in Ogbeide (2017)). Higher debt leads to increased interest payable, resulting in lower net profit before tax, as recorded in the financial statements. ...
The purpose of this study is to investigate the influence of financial attributes on the tax planning strategies of publicly listed manufacturing companies in Nigeria from 2012 to 2022. Additionally, it examines the moderating role of real earnings management (REM) in the relationship between financial attributes and tax planning. Data for this research were gathered from the annual reports of 41 publicly listed manufacturing firms in Nigeria. The study employed a correlational design using panel data analysis, with a fixed effects estimation applied to a simplified model and a moderated model. The results show that financial leverage positively and significantly affects the tax planning strategies of the listed manufacturing firms, and REM has a positive and significant influence on tax planning. Furthermore, REM was observed to significantly moderate the relationship between financial attributes and tax planning. Firms should engage in ethical and legal tax planning practices while taking their financial attributes into consideration. Companies need to be aware of the impact of REM on financial reporting and tax compliance and ensure that their tax planning aligns with relevant regulations.
... Así lo expresa Graham (1996), quien proporcionó evidencia destacando que las empresas sujetas a tasas impositivas altas emiten más deuda que sus contrapartes con tasas impositivas bajas, concluyendo que el apalancamiento es sensible a la tasa impositiva de un país. ...
El presente artículo aborda la problemática de la subcapitalización como práctica elusiva de impuestos, donde se realiza un análisis comparativo internacional teniendo en cuenta las reglas establecidas en la limitación de la deducibilidad de los gastos financieros. Una de estas reglas corresponde a la inclusión de un ratio fijo respecto a las ganancias antes de intereses, impuestos, depreciación y amortización (EBITDA), cuya aplicación muestra como resultado cuatro casos amparados en la legislación tributaria del Ecuador. En el primer caso, la totalidad del gasto financiero es deducible, en el segundo existen exceso de gastos financieros, por lo que solo será deducible hasta el límite máximo permitido en la normativa tributaria (20% del EBITDA), mientras que en el tercero y cuarto, todo el gasto financiero es considerado como un gasto no deducible a efectos de determinar el impuesto sobre la renta.
... Second, we find tax uncertainty is an important determinant of capital structure. Despite the evidence for a positive relation between corporate tax rate and incremental debt financing (MacKie-Mason, 1990;Givoly et al. 1992;Graham 1996), the impact of tax uncertainty emanating from contingent tax liability on capital structure is unclear. Under the framework of trade-off theory, the use of debt involves both benefits and costs. ...
The relation between taxes and capital structure has long been studied in academic literature but the relation between tax uncertainty and capital structure remains underexplored. Using a measure of tax uncertainty based on an accounting reserve for contingent tax liability, we find that tax uncertainty is negatively associated with firms’ leverage. In terms of economic significance, the effect of tax uncertainty on capital structure is comparable to that of nondebt tax shields. Our results also show that tax uncertainty is negatively related to debt issuance. The impact of tax uncertainty is more pronounced for firms with more financial constraints and default risks. Overall, our findings highlight a new channel through which tax planning policies affect corporate policies and document that the firm’s tax uncertainty is an important determinant of its capital structure and financing policies. Our results are robust to different empirical specifications and tests.
... The target leverage, which is the optimum level of leverage, can be determined when the tax benefits from the leverage trade-off with the cost of bankruptcy. The firms deviate from the target leverage and then re-adjust to that target (Graham 1996;Rajan and Zingales 1995). The speed of adjustment is identified as the rate at which firms try to achieve their optimum level of leverage (Hovakimian, Opler, and Titman 2001). ...
This study examines how family firms adjust their leverage towards optimal leverage. We use the dynamic system generalized method of moments (GMM) for analysis. The findings reveal that South Asian family firms adjust about 24% towards target leverage using market leverage and about 28% while using book leverage. The findings further suggest that growth opportunities, GDP growth rate, distance, lending rate, term spread, and short-term interest rate increase the speed of adjustment towards the target leverage. On the contrary, profitability and differential between the T-bills rate and the bank rate decrease the speed of adjustment.
... TA is total assets at the beginning of year. The independent Variable, Marginal Tax Rate (MTR) is measured following Graham (1996a), whereas the control variables include; Leverage-LV measured as Debt/Total Assets, Profitability-PROA measured as Profit before Tax /Total Assets and Firm Size-FS measured as Ln(Total Assets). ...
The study tends to examine the link between taxation motive and accounting conservatism after IFRS adoption in Nigeria. Unconditional conservatism was used as proxy to conservatism, Marginal tax rate was used as a proxy for tax burden, while controlling for Leverage (LV), Profitability (PROA) and Firm Size (FS). The result reveal MTR to be positive and significant which is similar to most studies (Boyoung & Kooyul, 2007; Kelley, 2005) conducted before IFRS adoption in Nigeria. This result suggest that IFRS (flexibility in implementation) give managers more incentives to make accounting information seem more credible by using conservative accounting techniques, thus, boosting conservatism. The study recommends that the Financial Reporting Council of Nigeria together with its subsidiary agencies should ensure proper implementation of IFRS by especially large corporation.
This research aims to examine how the Board of Director's characteristics (Board Duality, Board Independence and Board Size) and financial performance of the firm affect its capital structure using tax aggressiveness as a moderating variable. To the firm and the shareholders, taxes normally considered as an additional cost as it reduces the available cash flow, that's why firm's tends to apply different tax aggressiveness techniques in strategic tax planning to decrease tax liability and legitimate saving of taxes. The sample used is 58 Egyptian listed companies during the period 2015-2019. This research runs five multiple regression models to examine the relationships between research variables. The statistical results indicate that CEOD and board independence have a positive significant impact on company' capital structure, while board size have a significant negative relationship with capital structure. Moreover, results shows that ROA, current ratio and asset turn over have a negative significant impact on company' capital structure, while ROE have a significant positive relationship with capital structure. In addition, findings show that CEOD and firm size have a positive significant impact on company' tax aggressiveness, while board independence has a significant negative relationship with tax aggressiveness.
The primary goal of this study is to analyze the impact of economic and political power, debt policy, and political influence on tax aggressiveness during times of economic uncertainty. In this study, we choose as examples health and pharmaceutical firms trading on the Indonesia Stock Exchange between the years 2018 and 2021. To test for the predicted difference between before and after the covid 19 epidemic, researchers utilized multiple regression and other tests (paired sample t-test) in SPSS version 23. This research backs up the notion that fiscal stability and profitability affect tax aggressiveness. There was no difference in the prevalence of tax evasion strategies either before or after the Covid 19 pandemic, and neither debt policies nor political relationships seemed to have any influence on tax aggression. Using research findings to inform decision making or policy implementation may boost a company's future success. In addition to building on earlier replication attempts, this work also puts to the test comparisons made before and during the COVID-19 epidemic, making it a significant piece of research.
Exploramos ao longo desse trabalho as normas nacionais e as recomendações da OCDE para a dedução de juros de empresas que comerciam em mais de um país. O artigo faz a identificação do problema do viés ao débito, fortemente orientado pelo sistema tributário que discrimina o modo de financiamento quanto a sua origem, se pelo débito ou pelo equity, redundando na mudança de comportamento dos sujeitos da norma discriminatória em favor do financiamento pelo débito. Nesta toada, utilizamos as recomendações da OCDE como paradigma, EBITDA-base, para o enfrentamento da erosão da base tributária em um contexto internacional. Por fim, identificamos uma concorrência normativa na legislação autóctone que estabelece dois critérios diversos para a dedução de juros, uma de natureza puramente antielisiva e a outra limita o benefício entre as empresas domésticas. Na primeira, a norma é objetiva, e, na segunda, a norma é subjetiva.
I show that the corporate group structure generates tax benefits that create incentives for higher leverage. The tax benefits arise when losses on distressed subsidiaries are tax deductible for a parent firm. Higher tax rates then imply that more of these losses are borne by the government instead of the parent firm, reducing the expected costs of bankruptcy and thereby incentivizing the subsidiaries to take on higher leverage. Using data from a large sample of European multinationals, I show that this tax benefit exists on top of the trade-off theory and debt-shifting effects, and is stronger when deductions of subsidiary losses are more generous.
This study is set out to examine the effect of capital structure on financial performance of insurance companies in Nigeria. The study investigated the relationship between three variables namely, Debt Capital, Equity Capital and Preferential Shares, and the dependent variable of financial performance, proxied by Return on Equity (ROE). The study covers operations of the insurance firms in Nigeria with a period coverage of 2010–2022. Ex-post facto research design was employed by the study and secondary source of data was generated from the Annual Financial Statements of the selected insurance firms. Panel Multiple Regression analysis was used to test the hypotheses stated in this study. The result of the findings revealed that the hypothesis shows positive significant relationship between Debt Equity (DE) and financial performance of insurance company, hypothesis two shows positive significant relationship between Equity Capital (EC) and financial performance of insurance company and hypothesis three shows positive significant relationship between Preferential Shares (PS) and financial performance of insurance company. The study therefore recommends that insurance companies should consider optimizing their Debt Equity Ratio to improve their financial performance. The positive relationship suggests that a higher level of debt in proportion to equity is associated with better financial performance. Insurance companies should focus on strengthening their Equity Capital to improve their financial performance. Finally, insurance companies should consider strategically utilizing Preferential Shares to enhance their financial performance.
Purpose: The objective of this study is to conduct an empirical investigation of financial and operational firm specific factors that have an impact on the effective tax rate (ETR) for Bangladeshi manufacturing firms operating in a variety of industries. Method: The study solely focused on three different production industries: Pharmaceuticals and Chemicals, Engineering, and Ceramics. At least six years’ set of panel data have been collected from each industry between 2016 and 2021 in order to conduct an analysis of the panel corrected standard error model (PCSE). Thus, the PCSE model is used to conduct an analysis on a total of 265 observations derived from 44 different company listed in DSE. Findings: Out of eight financial and operational factors, firm size and profitability has a significant positive correlation with ETR in practically every sector separately and collectively. The findings are supported by political cost theory that suggests large firms have to pay more taxes due to political attention. One exception has been found regarding Ceramics sector where firm size has insignificant negative impact on ETR. This is reinforced by the political power theory, which states that politically influential corporations are less likely to voluntarily pay taxes because of the incentives provided by the power they wield in politics. On the other hand, Interest coverage ratio, Interest to sales ratio, capital intensity, firm age leverage has also significant impact on the effective tax rate in both model ETR1 and ETR2 differently across sectors. This study also concludes that there is variation among industry to industry and little bit of year indicators. Novelty: The study investigates the factors of manufacturing companies empirically and contributes to the variety of taxation issues among various manufacturing sectors. According to the authors’ best knowledge, there has been very little research on taxes, hence this study is a completely new contribution to Bangladesh’s manufacturing sector. Keywords: Effective Tax Rate; Dhaka Stock Exchange; Political Cost Theory; Political Power Theory
This study investigates the association between variable rate premiums (VRPs) charged by the Pension Benefit Guaranty Corporation (PBGC) and defined benefit pension funding in the United States. The PBGC requires VRPs from firms that fail to adequately fund their pension plans. Because millions rely on pension income, it is important to understand how government incentives impact pension funding decisions. In the aggregate, VRPs are positively associated with increases in pension funding. However, these premiums are not associated with excess pension contributions (EPCs) for financially distressed firms. These results suggest that financially distressed US firms engage in risk shifting. The lack of association persists even for financially distressed firms with tax benefits associated with pension funding. Finally, the association between VRPs and EPCs holds only for firms with combined lower borrowing costs and higher premiums. This finding suggests that higher premiums are not an effective incentive when firms also face higher borrowing costs and that lower premiums are not an effective incentive for EPCs, regardless of a firm's borrowing cost.
Zusammenfassung
Wie viele andere Länder auch hat Deutschland als Reaktion auf die von der COVID-19-Pandemie ausgelöste Wirtschaftskrise die steuerliche Verlustverrechnung verbessert. Jedoch blieb die Gewerbesteuer, die rund die Hälfte der Steuerbelastung auf Unternehmensgewinne ausmacht, von dieser Maßnahme ausgenommen. In diesem Beitrag analysieren Reinald Koch, Dominika Langenmayr und Lena Schön mithilfe einer dynamischen Mikrosimulation die potenziellen Auswirkungen eines Verlustrücktrags bei der Gewerbesteuer auf das Steueraufkommen. Wie sich erweist, kann sich die Einführung eines Verlustrücktrags mittelfristig größtenteils selbst finanzieren; kurzfristig kommt es allerdings zu Aufkommenseinbußen von durchschnittlich 7 Prozent. Es zeigt sich eine große Heterogenität zwischen Gemeinden, wobei strukturschwache Gemeinden oder Gemeinden mit niedrigem Gewerbesteueraufkommen besonders viel Aufkommen verlieren. Die Ergebnisse verdeutlichen den Reformbedarf der Gewerbesteuer.
Since Almeida et al. (J Financ 59:1777–1804, 2004), there has been a long debate on whether the cash flow sensitivity of cash (CFSC) measures financial constraints. Like all measures of financial constraints, CFSC is not a perfect one. Thus, how to measure financial constraints with CFSC effectively is an important issue. This paper shows that when a firm does not save through external financing, the CFSC can be effectively used to measure financial constraints. However, for firms saving from external financing, CFSC does not effectively measure financial constraints, especially when firms use external funds as substitutes for internal ones. The reason is that CFSC does not only reveal the propensity to save from cash flows but also the internal-external financing relation, which is not necessarily linked to financial constraints. Two identification methods are used to confirm our findings.
Purpose
This paper aims to investigate the impact of the largest shareholder's voting stake on the firm's capital structure decision.
Design/methodology/approach
To empirically analyze the influence of the voting stake on leverage, a large sample of 814 exchange-listed firms is applied. The baseline regression analysis is complemented by several robustness tests and a difference-in-difference regression analysis to mitigate endogeneity concerns.
Findings
The authors find a negative relationship between the voting stake of the largest shareholder and leverage, consistent with the notion that large, undiversified shareholders have the incentive to reduce risk. Additionally, results reveal that family control has a positive moderating effect, indicating that the negative relationship is less pronounced for family controlled firms.
Research limitations/implications
The authors contribute to the research by suggesting ownership concentration as another determinant of capital structure. Further, the authors add to the literature by showing how the association between ownership concentration and leverage is moderated by family control and that the identity of the largest shareholder is of great importance.
Practical implications
The paper provides important insights to the current debate on the proposal of the European Commission to reintroduce shares with multiple votes as part of the Listing Act. The authors expect the regulation to exacerbate the concentration of voting rights, which results in lower leverage and thus limits corporate growth.
Originality/value
The authors differentiate from previous studies by focusing the largest shareholders' voting stake, instead of using the ownership stake, to assess the impact of ownership concentration on leverage.
Managing working capital involves making decisions on the investment of available cash, maintaining a certain level of inventories, managing account receivables and account payables. Whereas working capital management is important because of its influence on profitability of SMEs, working capital management practices are not given due attention in Uganda by the owner managers of SMEs. Small and medium Enterprises (SMEs) are the drivers of Ugandan economy; they are the engine of growth for the economic development, innovation, spur economic prosperity and wealth creation of Uganda. Small and medium Enterprises (SMEs) are seen as a driving force for the promotion of an economy and they contribute immensely to the economic development of any country. Despite the significant contribution of small and medium enterprises to the Ugandan economy, the potentials of the SMEs have not been exploited fully and this is a concern of all stakeholders in the economy. Therefore, the purpose of the study was to establish the relationship between Working Capital management practices and performance of SMEs in Uganda a view to establishing a coherent model directed at improving performance. The study also examined factors for efficient Working Capital management practices for SMEs in Uganda. The study adopted a positivist quantitative paradigm with cross sectional and correlational designs. The findings in respect of the main purpose of this study indicated that in Working Capital management practices accounted for 33.8% percent of the variance in performance of SMEs. The results also indicated that Cash Management Practices influence highly since it predicts over 22% of the variance in SMEs performance. The study accepted the hypothesis that Working Capital management practices are positively related with SMEs performance. The present study supported a multi-theoretic approach in explaining performance of SMEs in Uganda. The study supports the pecking order theory in explaining the financing of SMEs together with resource-based view as the theories that help in explaining performance of SMEs. The study confirmed efficient Working Capital management practices positively influence and affect performance of SMEs in Uganda. It was recommended that SMEs should consider Working Capital management practices as an integral part in achieving SMEs performance. They need to give priority to Cash Management since it was found to have a big influence on SMEs performance. Since cash is a component of working capital, then, SMEs owners need to separate business transactions from their personal transactions so as to have financial discipline which would ensure sustainable working capital thus meeting short term needs SMEs.
Small and medium Enterprises (SMEs) are the drivers of Ugandan economy; they are the engine of growth for the economic development, innovation, spur economic prosperity and wealth creation of Uganda. Small and medium Enterprises (SMEs) are seen as a driving force for the promotion of an economy and they contribute immensely to the economic development of any country. The purpose of the study was to establish the relationship between Strategic Financial Management Practices and performance of SMEs in Uganda a view to establishing a coherent model directed at improving business performance. The study also examined factors for efficient Strategic Financial Management Practices for SMEs in Uganda. The study adopted a positivist quantitative paradigm with cross sectional and correlational designs. The study used a respondent sample of 335 SMEs operating in Mbarara, Sheema and Bushenyi whose owners/managers were the unit of enquiry. Structural Equations Modeling with Analysis of Moment Structures were used to for statistical Modeling. The findings in respect of the main purpose of this study indicated that in Strategic Financial Management Practices accounted for 33.8% percent of the variance in business performance of SMEs. The results also indicated that working capital management influences highly since it predicts over 22% of the variance in business performance. The study accepted the hypothesis that Strategic Financial Management Practices are positively related with business performance. The present study supported a multi-theoretic approach in explaining business performance of SMEs in Uganda. The study supports the pecking order theory in explaining the financing of SMEs together with resource based view as the theories that help in explaining business performance of SMEs. The study confirmed efficient Strategic Financial Management Practices factor structure of observed variables and the latent variables. As a result, the study provided models for efficient Strategic Financial Management Practices. These models can then be used to provide a trajectory for improving business performance of SMEs in Uganda. Policy makers, PSFU and SMEs owners may use these findings as a way improving business performance of SMEs in Uganda since the SMEs are great contributors to the Ugandan economy. The owners of SMEs should develop a positive attitude towards adopting Strategic Financial Management Practices so as to achieve desired performance
We examine explanations for corporate financing-, dividend-, and compensation-policy choices. We document robust empirical relations among corporate policy decisions and various firm characteristics. Our evidence suggests contracting theories are more important in explaining cross-sectional variation in observed financial, dividend, and compensation policies than either tax-based or signaling theories.
This paper provides clear evidence of substantial tax effects on the choice between issuing debt or equity; most studies fail to find significant effects. The relationship between tax shields and debt policy is clarified. Other papers miss the fact that most tax shields have a negligible effect on the marginal tax rate for most firms. New predictions are strongly supported by an empirical analysis; the method is to study incremental financing decisions using discrete choice analysis. Previous researchers examined debt/equity ratios, but tests based on incremental decisions should have greater power. Copyright 1990 by American Finance Association.
Given the recent emphasis on effective tax rates by policy makers and accounting researchers, this study investigates the relation between firm size and corporate tax burdens on a yearly and an industry basis. The analysis is conducted using five effective tax measures employed in previous studies in order to determine the degree to which inferences between size and tax burden are robust across these different effective tax measures. The results indicate that the relation is fairly robust across measures and, in instances in which the relation is not upheld by our analysis, sample composition explains differences in the observed relation between firm size and corporate tax burden.
This paper contrasts the "static tradeoff" and "pecking order" theories of capital structure choice by corporations. In the static tradeoff theory, optimal capital structure is reached when the tax advantage to borrowing is balanced, at the margin, by costs of financial distress. In the pecking order theory, firms preferinternal to external funds, and debt to equity if external funds are needed. Thus the debt ratio reflects the cumulative requirement for external financing. Pecking order behavior follows from simple asymmetric information models. The paper closes with a review of empirical evidence relevant to the two theories.
Firm size has been used as a proxy for the firm's political costs and hence managers' proclivity to choose income reducing accounting procedures. This study provides additional evidence on this topic by examining the association between firm size and effective corporate tax rates. The latter are one component of a firm's political costs. The roughly fifty largest U.S. exchange-listed firms, in particular oil and gas companies and manufacturing firms, have significantly higher worldwide tax rates than other firms. These higher tax rates are observed primarily after the implementation of the U.S. 1969 Tax Reform Act and after the OPEC countries raised their tax rates on U.S. oil producers. The findings, which are insensitive to alternative sources of data, alternative measures of firm size, and alternative measures of effective tax rates, are consistent with the use in previous studies of firm size as a proxy for the firm's political costs.
A firm's liquidation can impose costs on its customers, workers, and suppliers. An agency relationship between these individuals and the firm exists in that the liquidation decision controlled by the firm (as the agent) affects other individuals (the customers, workers, and suppliers as principals). The analysis in this paper suggests that capital structure can control the incentive/conflict problem of this relationship by serving as a pre-positioning or bonding mechanism. Appropriate selection of capital structure assures that incentives are aligned so that the firm implements the ex-ante value-maximizing liquidation policy.
This paper focuses on how best to measure the corporate marginal tax rate, which is an important input into financial analysis of the cost of capital, financing policy, corporate hedging, and corporate reorganizations. The results indicate that the simulated tax rate used by Shevlin (1990) and Graham (1996), although difficult to calculate, is the best available proxy for the ‘true’ marginal tax rate. If the simulated rate is unavailable, an easy-to-calculate trichotomous variable or the statutory marginal tax rate (which captures the progressivity in the tax schedule) are reasonable alternatives, better than most commonly used tax variables.
This paper presents additional evidence on the relation between the investment opportunity set and financing, dividend, and compensation policies. Our results are based on a sample of 237 growth firms and 237 nongrowth firms. We find that growth firms have significantly lower debt/equity ratios and exhibit significantly lower dividend yields than nongrowth firms. We also find that growth firms pay significantly higher levels of cash compensation to their executives and have a significantly higher incidence of stock option plans than nongrowth firms. However, controlling for firm size, the incidence of bonus plans, performance plans, and restricted stock plans does not differ between growth and nongrowth samples.
In this paper, a model of corporate leverage choice is formulated in which corporate and differential personal taxes exist and supply side adjustments by firms enter into the determination of equilibrium relative prices of debt and equity. The presence of corporate tax shield substitutes for debt such as accounting depreciation, depletion allowances, and investment tax credits is shown to imply a market equilibrium in which each firm has a unique interior optimum leverage decision (with or without leverage-related costs). The optimal leverage model yields a number of interesting predictions regarding cross-sectional and time-series properties of firms' capital structures. Extant evidence bearing on these predictions is examined.
Assistant Professor of Finance, New York University. The author acknowledges the helpful suggestions and comments of Keith V. Smith, Edward F. Renshaw, Lawrence S. Ritter and the Journal' reviewer. The research was conducted while under a Regents Fellowship at the University of California, Los Angeles.
Vita. Thesis--University of California, Los Angeles. Includes bibliographical references (leaves 133-138). Photocopy of typescript.
This study uses tax return data for U. S. nonfinancial corporations for the period 1971–1982 to estimate the importance of
restrictions on the ability of firms to use tax credits and to obtain refunds for tax losses. Our results suggest that the
incidence of such unused tax benefits increased substantially during the early 1980s, though we do not find these increases
attributable to increased investment incentives during that period. We present estimates of the marginal tax rate on interest
payments which take into account unused tax benefits and emphasize the importance of distinguishing current tax payments from
marginal tax rates in estimating the incentive to invest.
While the theoretical relation between taxes and capital structure has been extensively analyzed, the empirical evidence on
this issue has thus far been inconclusive. One of the main difficulties confronting previous empirical studies of the cross-sectional
relationship between taxes and leverage was the control of intervening variables. The Tax Reform Act of 1986 (TRA), which
drastically changed the tax regime, provides a unique opportunity to assess the interaction between taxes and leverage decisions
in a controlled environment. We test the relationship between leverage and certain tax-related variables for a large sample
of companies in the years surrounding the enactment of the TRA. The results support the tax-based theories of capital structure.
The findings indicate that there exists a substitution effect between debt and nondebt tax shields, and that both corporate
and personal tax rates affect leverage decisions.
We test whether banks’ investment and financing policies can be explained by tax status. We document changes in bank holdings
of municipal bonds in response to changes in tax rules relating to deductibility of interest expense. We also document an
association between banks’ marginal tax rates and their investment and financing decisions, which is consistent with the existence
of tax clienteles. However, banks do not sort themselves perfectly into investment and financing clienteles because of adjustment
costs. We posit specific types of transaction-cost impediments to tax planning, and document that banks apparently trade off
these costs against tax-planning benefits.
Standard real business cycle models must rely on total factor productivity (TFP) shocks to explain the observed comovement of consumption, investment, and hours worked. This paper shows that a neoclassical model consistent with observed heterogeneity in labor supply and consumption can generate comovement in the absence of TFP shocks. Intertemporal substitution of goods and leisure induces comovement over the business cycle through heterogeneity in the consumption behavior of employed and unemployed workers. This result owes to two model features introduced to capture important characteristics of U.S. labor market data. First, individual consumption is affected by the number of hours worked: Employed agents consume more on average than the unemployed do. Second, changes in the employment rate, a central factor explaining variation in total hours, affect aggregate consumption. Demand shocks--such as shifts in the marginal efficiency of investment, as well as government spending shocks and news shocks--are shown to generate economic fluctuations consistent with observed business cycles.
This paper analyzes the explanatory power of some recent theories of optimal capital structure. The study extends empirical work on capital-structure theory in three ways. First, it examines a broader set of capital-structure theories, many of which have not previously been analyzed empirically. Second, since the theories have different empirical implications in regards to different types of debt instruments, the authors analyze measures of short-term, long-term, and convertible debt rather than an aggregate measure of total debt. And third, the study uses a factor-analytic technique that mitigates the measurement problems encountered when working with proxy variables. Copyright 1988 by American Finance Association.
Under corporate and personal taxation, the authors demonstrate that the relation between optimal debt level and business risk is roughly U-shaped. This result follows from the fact that the tax liability is an option portfolio that is long in the corporate tax option and short in the personal tax option. Therefore, the net effect of a change in business risk on the optimal debt level depends upon the relative magnitudes of the resultant marginal changes in the values of these two options. Results of empirical tests offer support for the predicted U-shaped relationship. Copyright 1991 by American Finance Association.
The rise of managed healthcare organizations (MCOs) and the associated increased integration among providers has transformed US healthcare and at the same time raised antitrust concern. This paper examines how competition among MCOs affects the efficiency gains of improved price coordination achieved through integration. MCOs offer differentiated services and contract with specialized and complementary upstream providers to supply these services. We identify strategic pricing equilibria under three different market structures: overlapping upstream physician-hospital alliances, upstream-downstream arrangements such as Preferred Provider Organizations, and vertically integrated Health Maintenance Organizations. The efficiency gains achieved depend not only on organizational form but also on the toughness of premium competition. We show that, contrary to popular thinking, providers and insurers do not earn maximum net revenue when they are monopolies or monopsonies, but rather at an intermediate level of market power. Furthermore, closer integration of upstream and downstream providers does not necessarily increase net revenues.
I modify the uniform-price auction rules in allowing the seller to ration bidders. This allows me to provide a strategic foundation for underpricing when the seller has an interest in ownership dispersion. Moreover, many of the so-called "collusive-seeming" equilibria disappear.
This paper presents estimates of the effective tax value of incremental interest deductions for corporations taking into account that they may not be able to utilize all their interest deductions fully because of either insufficient taxable income or the availability of nondebt tax shields. After describing particular features of the tax code which may drive a wedge between statutory and effective tax rates for debt finance, we present estimates using the Treasury Corporate Tax Model of effective tax rates for a variety of industry groupings. Our estimates suggest that the after‐tax cost of debt varies widely across industries.
Proxies for the marginal tax rate, Working paper
- Graham
- John
Graham, John, 1995, Proxies for the marginal tax rate, Working paper (University of Utah, Salt Lake City, UT).
Earning management of firms subject to the alternative minimum tax
- Manzon
Manzon? Gil, 1992, Earning management of firms subject to the alternative minimum tax, Journal of the American Taxation Association 14, 88-l 11.
Journal oJ'Financia1 Ecor~ornics 41 (I996) II-73
- J R Gmham
J.R. Gmham/Journal oJ'Financia1 Ecor~ornics 41 (I996) II-73 J.R. Gruham/JourrzaL of Financial Ecor~omics 41 (1996) 41-73
An investigation of the firm size-effective tax rate relation in the Tax planning, regulatory capital planning, and financial reporting strategy for commercial banks
- Qmer
- Karen Thomas
- David Molloy
- Ziebart
Qmer, Thomas, Karen Molloy, and David Ziebart, 1993, An investigation of the firm size-effective tax rate relation in the 1980s Journal of Accounting, Auditing and Finance 8, 167-182. &holes, Myron, G. Peter Wilson, and Mark Wolfson, 1990, Tax planning, regulatory capital planning, and financial reporting strategy for commercial banks, Review of Financial Studies 3, 625-650.
An empirical investigation of debt, leases, and taxes, Working paper
- Graham
- Michael John
- James Lemmon
- Schallheim
Graham, John, Michael Lemmon, and James Schallheim, 1995, An empirical investigation of debt, leases, and taxes, Working paper (University of Utah, Salt Lake City, UT).
Estimating the tax advantage of corporate debt
- Courdes
Dynamic capital structure choice: Theory and tests
- Fisher
An empirical investigation of debt, leases, and taxes
- Graham
The effect of business risk on corporate capital structure: Theory and evidence
- Kale