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- Title
TAXES AND CAPITAL STRUCTURE: A STUDY OF EUROPEAN COMPANIES.
- Authors
YUE CHENG; GREEN, CHRISTOPHER J.
- Abstract
We analyse the impact of tax policy on firms' leverage ratios in a balanced panel of 129 medium-sized listed European companies from 1993 to 2005. A general model of company leverage is applied within which King's tax ratios are used to capture tax policy changes, controlling for non-tax influences. Leverage measures studied include total, long-term and short-term debt. A generalized method of moments estimator is used to control for endogeneity. The results suggest that tax policy has a significant but small impact on firms' debt ratios and that non-debt tax shields are a substitute for debt in company activities.
- Subjects
EUROPE; TAXATION; CAPITAL structure; SHORT-term debt; CORPORATE debt; LONG-term business financing; CORPORATE finance; FINANCIAL leverage; ESTIMATION theory
- Publication
Manchester School (1463-6786), 2008, Vol 76, p85
- ISSN
1463-6786
- Publication type
Article
- DOI
10.1111/j.1467-9957.2008.01082.x