Capital Structure And International Debt Shifting
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Capital Structure And International Debt Shifting
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Author : Mr.Luc Laeven
language : en
Publisher: International Monetary Fund
Release Date : 2007-02-01
Capital Structure And International Debt Shifting written by Mr.Luc Laeven and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-02-01 with Business & Economics categories.
This paper presents a model of a multinational firm's optimal debt policy that incorporates international taxation factors. The model yields the prediction that a multinational firm's indebtedness in a country depends on a weighted average of national tax rates and differences between national and foreign tax rates. These differences matter because multinationals have an incentive to shift debt to high-tax countries. The predictions of the model are tested using a novel firm-level dataset for European multinationals and their subsidiaries, combined with newly collected data on the international tax treatment of dividend and interest streams. Our empirical results show that corporate debt policy indeed not only reflects domestic corporate tax rates but also differences in international tax systems. These findings contribute to our understanding of how corporate debt policy is set in an international context.
Capital Structure And International Debt Shifting
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Author : Harry Huizinga
language : en
Publisher:
Release Date : 2006
Capital Structure And International Debt Shifting written by Harry Huizinga and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with International business enterprises categories.
Taxation And Leverage In International Banking
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Author : Ms.Grace Weishi Gu
language : en
Publisher: International Monetary Fund
Release Date : 2012-11-30
Taxation And Leverage In International Banking written by Ms.Grace Weishi Gu and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-11-30 with Business & Economics categories.
This paper explores how corporate taxes affect the financial structure of multinational banks. Guided by a simple theory of optimal capital structure it tests (i) whether corporate taxes induce subsidiary banks to raise their debt-asset ratio in light of the traditional debt bias; and (ii) whether international corporate tax differentials vis-a-vis foreign subsidiary banks affect the intra-bank capital structure through international debt shifting. Using a novel subsidiary-level dataset for 558 commercial bank subsidiaries of the 86 largest multinational banks in the world, we find that taxes matter significantly, through both the traditional debt bias channel and the international debt shifting that is due to the international tax differentials. The latter channel is more robust and tends to be quantitatively more important. Our results imply that taxation causes significant international debt spillovers through multinational banks, which has potentially important implications for tax policy.
Thin Capitalization Rules And Multinational Firm Capital Structure
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Author : Jennifer Blouin
language : en
Publisher: International Monetary Fund
Release Date : 2014-01-24
Thin Capitalization Rules And Multinational Firm Capital Structure written by Jennifer Blouin and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-01-24 with Business & Economics categories.
This paper examines the impact of thin capitalization rules that limit the tax deductibility of interest on the capital structure of the foreign affiliates of US multinationals. We construct a new data set on thin capitalization rules in 54 countries for the period 1982-2004. Using confidential data on the internal and total leverage of foreign affiliates of US multinationals, we find that thin capitalization rules significantly affect multinational firm capital structure. Specifically, restrictions on an affiliate’s debt-to-assets ratio reduce this ratio on average by 1.9%, while restrictions on an affiliate’s borrowing from the parent-to-equity ratio reduce this ratio by 6.3%. Also, restrictions on borrowing from the parent reduce the affiliate’s debt-to-assets ratio by 0.8%, which shows that rules targeting internal leverage have an indirect effect on the overall indebtedness of affiliate firms. The impact of capitalization rules on affiliate leverage is higher if their application is automatic rather than discretionary. Furthermore, thin capitalization regimes have aggregate firm effects: they reduce the firm’s aggregate interest expense but lower firm valuation. Overall, our results show than thin capitalization rules, which thus far have been understudied, have a substantial effect on the capital structure within multinational firms, with implications for the firm’s market valuation.
Tax Biases To Debt Finance
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Author : Ruud A. de Mooij
language : en
Publisher: International Monetary Fund
Release Date : 2011-05-03
Tax Biases To Debt Finance written by Ruud A. de Mooij and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-05-03 with Business & Economics categories.
Staff Discussion Notes showcase the latest policy-related analysis and research being developed by individual IMF staff and are published to elicit comment and to further debate. These papers are generally brief and written in nontechnical language, and so are aimed at a broad audience interested in economic policy issues. This Web-only series replaced Staff Position Notes in January 2011.
Capital Structures In Developing Countries
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Author : Asl? Demirgüç-Kunt
language : en
Publisher: World Bank Publications
Release Date : 1994
Capital Structures In Developing Countries written by Asl? Demirgüç-Kunt and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 1994 with Capital categories.
Variables that predict capital structure in the United States also predict choices of capital structure in a sample of ten developing countries. In several countries, total indebtedness is negatively related to net fixed assets, suggesting that markets for long- term debt do not function effectively.
Curbing Corporate Debt Bias
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Author : Ruud A. de Mooij
language : en
Publisher: International Monetary Fund
Release Date : 2017-02-10
Curbing Corporate Debt Bias written by Ruud A. de Mooij and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-02-10 with Business & Economics categories.
Tax provisions favoring corporate debt over equity finance (“debt bias”) are widely recognized as a risk to financial stability. This paper explores whether and how thin-capitalization rules, which restrict interest deductibility beyond a certain amount, affect corporate debt ratios and mitigate financial stability risk. We find that rules targeted at related party borrowing (the majority of today’s rules) have no significant impact on debt bias—which relates to third-party borrowing. Also, these rules have no effect on broader indicators of firm financial distress. Rules applying to all debt, in contrast, turn out to be effective: the presence of such a rule reduces the debt-asset ratio in an average company by 5 percentage points; and they reduce the probability for a firm to be in financial distress by 5 percent. Debt ratios are found to be more responsive to thin capitalization rules in industries characterized by a high share of tangible assets.
International Corporate Tax Avoidance A Review Of The Channels Magnitudes And Blind Spots
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Author : Sebastian Beer
language : en
Publisher: International Monetary Fund
Release Date : 2018-07-23
International Corporate Tax Avoidance A Review Of The Channels Magnitudes And Blind Spots written by Sebastian Beer and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-07-23 with Business & Economics categories.
This paper reviews the rapidly growing empirical literature on international tax avoidance by multinational corporations. It surveys evidence on main channels of corporate tax avoidance including transfer mispricing, international debt shifting, treaty shopping, tax deferral and corporate inversions. Moreover, it performs a meta analysis of the extensive literature that estimates the overall size of profit shifting. We find that the literature suggests that, on average, a 1 percentage-point lower corporate tax rate will expand before-tax income by 1 percent—an effect that is larger than reported as the consensus estimate in previous surveys and tends to be increasing over time. The literature on tax avoidance still has several unresolved puzzles and blind spots that require further research.
Global Waves Of Debt
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Author : M. Ayhan Kose
language : en
Publisher: World Bank Publications
Release Date : 2021-03-03
Global Waves Of Debt written by M. Ayhan Kose and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-03-03 with Business & Economics categories.
The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.
The Tax Elasticity Of Corporate Debt
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Author : Ruud A. de Mooij
language : en
Publisher: International Monetary Fund
Release Date : 2011-04-01
The Tax Elasticity Of Corporate Debt written by Ruud A. de Mooij and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-04-01 with Business & Economics categories.
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.