Download or read book The Effect of Taxes on Corporate Debt Maturity Decisions written by Kaye J. Newberry and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study extends prior ...

Download or read book A Review of Taxes and Corporate Finance written by John R. Graham and published by Now Publishers Inc. This book was released on 2006 with total page 136 pages. Available in PDF, EPUB and Kindle. Book excerpt: A Review of Taxes and Corporate Finance investigates the consequences of taxation on corporate finance focusing on how taxes affect corporate policies and firm value. A common theme is that tax rules affect corporate incentives and decisions. A second emphasis is on research that describes how taxes affect costs and benefits. A Review of Taxes and Corporate Finance explores the multiple avenues for taxes to affect corporate decisions including capital structure decisions, organizational form and restructurings, payout policy, compensation policy, risk management, and the use of tax shelters. The author provides a theoretical framework, empirical predictions, and empirical evidence for each of these areas. Each section concludes with a discussion of unanswered questions and possible avenues for future research. A Review of Taxes and Corporate Finance is valuable reading for researchers and professionals in corporate finance, corporate governance, public finance and tax policy.

Download or read book The Tax Elasticity of Corporate Debt written by Ruud A. de Mooij and published by International Monetary Fund. This book was released on 2011-04-01 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: Although the empirical literature has long struggled to identify the impact of taxes on corporate financial structure, a recent boom in studies offers ample support for the debt bias of taxation. Yet, studies differ considerably in effect size and reveal an equally large variety in methodologies and specifications. This paper sheds light on this variation and assesses the systematic impact on the size of the effects. We find that, typically, a one percentage point higher tax rate increases the debt-asset ratio by between 0.17 and 0.28. Responses are increasing over time, which suggests that debt bias distortions have become more important.

Download or read book Debt Taxes and Corporate Restructuring written by John B. Shoven and published by Brookings Institution Press. This book was released on 2012-01-01 with total page 228 pages. Available in PDF, EPUB and Kindle. Book excerpt: The boom in corporate restructuring, accompanied by large increases in debt finance, was one of the most important developments in the U.S. economy in the 1980s. Financial and tax specialists analyze how the U.S. tax system-especially in its bias toward debt financing-has affected corporate financial decisions and influenced the recent wave of corporate restructuring. The authors evaluate the hypothesis that the rise in the cost of capital during the 1980s helped stimulate the surge in corporate takeovers. They analyze the effect that changes in tax laws and in the volume of government debt have had on corporate financial decisions. The authors examine how recent financial innovations have blurred the distinction between debt and equity finance.

Download or read book The Effect of Expected Effective Corporate Tax Rates on Incremental Financing Decisions written by Mr.Reint Gropp and published by International Monetary Fund. This book was released on 1997-04-01 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses U.S. panel data to estimate the effect of expected effective corporate tax rates on firm’s leverage. The paper directly estimates expected corporate tax rates using rational expectations. The estimated measures of the expected effective tax rates of firms are related to a continuous measure of incremental debt financing. The paper finds that expected effective tax rates are significantly and positively related to a higher level of debt financing. Simulations suggest that debt issues would double if firms were unable to shield profits and actually faced the statutory tax rate.

Download or read book The Capital Structure Decision written by Harold Bierman Jr. and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 230 pages. Available in PDF, EPUB and Kindle. Book excerpt: In 1958 an academic paper on corporate finance written by two professors (Merton Miller and Frances Modigliani, who were later awarded the Nobel prize for their research efforts) was published in The American Economic Review. One prime conclusion of their paper was that the exact form of a firm's capital structure did not affect the firm's value. Later papers by the same two authors and by many others modified the assumptions and changed this conclusion. We now think that capital structure decisions do affect a firm's value and corporate managers should understand better the financing alternatives that are available. One of the most important financial decisions is the decision to buy or lease assets. The leasing industry is large and getting larger. Unfortunately, it is very easy for a firm to evaluate incorrectly lease alternatives (see Chapter 12). The capital structure decision is one of the three most important financial decisions that management make (the distribution of earnings and the capital budgeting decisions are the other two contenders). Managers should increase their understanding of capital structure alternatives and remember that choosing the best capital structure is an art and not an exact simple calculation. But applying the art can be improved with understanding.

Download or read book The Effect of Taxes on Corporate Financing Decisions written by and published by . This book was released on 2000 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book How Tax Hypothesis Determines Debt Maturity in Indian Corporate Sector written by Dr. Venugopalan T. and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Trade-off theory states that the optimum debt maturity is determined by a dynamic trade-off between the tax advantages of debt and deadweight cost of bankruptcy as the firms recapitalize with debt depending upon the term structure of interest rate and asset volatility. Therefore, the corporate tax rate, term structure, and asset variance jointly determine corporate debt maturity. This paper empirically examines how the tax hypothesis determines debt maturity in the Indian corporate sector using a panel data of 266 companies drawn from BSE 500 for the period 2000-2010. Our research findings unequivocally establishes that the tax rate, term structure and asset variance profoundly influence the debt maturity structure in Indian corporate sector. The statistically significant and negative coefficient on tax rate clearly indicates that optimal debt maturity is determined by the trade-off between the tax benefits of debt against the cost associated with financial distress and bankruptcy risk. The coefficient on term structure shows that in the periods of declining term structure and higher corporate tax rate, the firms maximize market value by increasing the proportion of short-term debt in the capital structure. The statistically significant but positive regression coefficient on asset variance rejects the tax hypothesis that debt maturity is inversely related to asset variance. The complex tax regime, high rate of corporate tax and dysfunctional corporate bond market have adversely affected the growth and development of the business and industry. Therefore, comprehensive reforms are required in tax code, and initiatives are to be taken for developing the corporate bond market by introducing diverse products, which can provide avenues for financing, investment, and risk diversification.

Download or read book Advances in Taxation written by John Hasseldine and published by Emerald Group Publishing. This book was released on 2024-06-20 with total page 257 pages. Available in PDF, EPUB and Kindle. Book excerpt: Volume 31 of Advances in Taxation includes studies from expert contributors, exploring topics such as: firms’ domestic and foreign effective tax rates; tax avoidance; and tax compliance. A study reviews prior literature on tax increment financing, an economic development tool frequently used by U.S. local governments.

Download or read book A Model for Corporate Debt Maturity Decisions written by James Russell Morris and published by . This book was released on 1974 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asymmetric Information Corporate Finance and Investment written by R. Glenn Hubbard and published by University of Chicago Press. This book was released on 2009-05-15 with total page 354 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this volume, specialists from traditionally separate areas in economics and finance investigate issues at the conjunction of their fields. They argue that financial decisions of the firm can affect real economic activity—and this is true for enough firms and consumers to have significant aggregate economic effects. They demonstrate that important differences—asymmetries—in access to information between "borrowers" and "lenders" ("insiders" and "outsiders") in financial transactions affect investment decisions of firms and the organization of financial markets. The original research emphasizes the role of information problems in explaining empirically important links between internal finance and investment, as well as their role in accounting for observed variations in mechanisms for corporate control.

Download or read book The Tax Advantage of Corporate Debt after Tax Reform written by George A. Plesko and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The Tax Reform Act of 1986 (TRA86) provided a natural experiment for analyzing the influence of taxes on corporate leverage decisions. A centerpiece of TRA86 was the lowering of the maximum statutory corporate marginal tax rate facing corporations from 46 percent to 34 percent accompanied by broad changes in the tax base, and the curtailment or elimination of numerous tax shields. This paper uses direct estimates of the effects of the tax changes on corporate marginal tax rates, focusing on the tax savings from increased leverage, and provides an estimate of the extent anticipated changes in marginal tax rates influenced corporate leverage decisions. The results show TRA86 was expected to decrease average marginal tax rates approximately 5 percentage points and decrease the dispersion of tax rates across industries. The second half of the paper tests whether the anticipated marginal tax rate changes had an effect on corporate leverage. The estimates provide support for the role of corporate taxation in firms' leverage decisions, and quantify the leverage changes in response to TRA86. In addition, since the effects of the tax change are measured directly, rather than through a proxy, an estimate of the magnitude of such changes can be made. Corporate debt in 1988 is estimated to have been $312 billion lower than it would have been in the absence of TRA86.

Download or read book Tax Policy Leverage and Macroeconomic Stability written by International Monetary Fund. Fiscal Affairs Dept. and published by International Monetary Fund. This book was released on 2016-12-10 with total page 78 pages. Available in PDF, EPUB and Kindle. Book excerpt: Risks to macroeconomic stability posed by excessive private leverage are significantly amplified by tax distortions. ‘Debt bias’ (tax provisions favoring finance by debt rather than equity) has increased leverage in both the household and corporate sectors, and is now widely recognized as a significant macroeconomic concern. This paper presents new evidence of the extent of debt bias, including estimates for banks and non-bank financial institutions both before and after the global financial crisis. It presents policy options to alleviate debt bias, and assesses their effectiveness. The paper finds that thin capitalization rules restricting interest deductibility have only partially been able to address debt bias, but that an allowance for corporate equity has generally proved effective. The paper concludes that debt bias should feature prominently in countries’ tax reform plans in the coming years.

Download or read book An Empirical Analysis of Corporate Debt Maturity Structure written by Aydin Ozkan and published by . This book was released on 1999 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Pouring Oil on Fire Interest Deductibility and Corporate Debt written by Pietro Dallari and published by International Monetary Fund. This book was released on 2018-12-07 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the role of tax incentives towards debt finance in the buildup of leverage in the nonfinancial corporate (NFC) sector, using a large firm-level dataset. We find that so-called debt bias is a significant driver of leverage, for both small and medium-sized enterprises and larger firms, with its effect accounting for about a quarter of leverage. The strength of this effect differs with firm size, the availability of collateral, income and income volatility, cash flow, and capital intensity. We conclude that leveling the playing field between debt and equity finance through tax policy reform would decrease NFC leverage, reducing economic risks posited by leverage.

Download or read book Do Taxes Affect Corporate Debt Policy written by Roger Hall Gordon and published by . This book was released on 1999 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Past attempts to measure the impact of taxes on corporate debt policy have focused on larger firms. Given that the top statutory corporate tax rate has varied little in recent years, tax incentives vary among these firms, almost entirely due to current or prospective tax losses. Results are inevitably mixed, given that firms with losses or nondebt tax shields may have different propensities to borrow even ignoring taxes. This paper uses US Statistics of Income balance sheet data on all corporations, to compare the debt policies of firms of different sizes. Given the progressivity in the corporate tax schedule, small firms face very different tax rates than larger firms. Relative tax rates have also changed frequently over time. Our results suggest that taxes have had a strong and statistically significant effect on debt levels. In particular, the difference in corporate tax rates currently faced by the largest vs. the smallest firms (35% vs. 15%) is forecast to induce larger firms to finance an additional 8% of their assets with debt, compared with smaller firms

Download or read book Corporate Debt and Taxes written by Michelle Hanlon and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide updates to and perspectives on the enduring topic of debt and taxes. The recent decade brought us new empirical strategies, accounting rules, and tax laws. We discuss how these and other developments change our understanding of leverage and taxes. Overall, tax incentives still do not seem to have a consistent, first-order effect on corporate capital structure. This presents a puzzle as governments increasingly limit interest deductibility, citing its contribution to overleverage and distress. We discuss critical empirical challenges such as measurement, highlight issues surrounding assumptions about tax rates and real-world financing decisions, and offer insights and direction for future research. We conclude that rather than asking if taxes are a first-order driver of corporate capital structure, a more productive goal is a greater understanding of when tax incentives yield material effects on corporate capital structure.