Research report 2010 - Max Planck Institute for Tax Law and Public Finance
Preferential tax treatment of debt and its influence on firms’ financial structure
Authors
Dwenger, Nadja
Departments
Finanzwissenschaft
Max-Planck-Institut für Steuerrecht und Öffentliche Finanzen, München
Max-Planck-Institut für Steuerrecht und Öffentliche Finanzen, München
Summary
A possible credit crunch caused by the recent financial crisis has renewed the debate on fiscal ways to strengthen equity financing. While economists, despite extensive research efforts, have had great difficulty providing any empirical evidence that taxes matter for the financial leverage of corporations, the study presented here has empirically shown the influence of taxes on firms’ financial decisions. This allows for a precise quantification of the effect of taxes on financial structure.