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Corporate Tax Avoidance And Debt Policy
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Book Synopsis Corporate Tax Avoidance and Debt Policy by : Ramesh P. Rao
Download or read book Corporate Tax Avoidance and Debt Policy written by Ramesh P. Rao and published by . This book was released on 2013 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the relation between corporate tax avoidance and debt policy using a large sample of firms from 1988 to 2006. We use modified measures of book-tax difference and long-run cash effective tax rate to proxy for tax avoidance. Using both measures we find consistent evidence that tax avoidance is negatively associated with leverage ratio. Further, we find that the substitution of non-debt tax avoidance for debt dissipates for very large, highly profitable firms, and firms with higher credit rating. Our findings are robust to alternative measures of leverage. Consistent with the debt substitution hypothesis, we offer new evidence to show that tax is an important factor in corporate capital structure decisions.
Book Synopsis Corporate Tax Avoidance, Debt Ratio, and Corporate Governance by : Hiroshi Onuma
Download or read book Corporate Tax Avoidance, Debt Ratio, and Corporate Governance written by Hiroshi Onuma and published by . This book was released on 2018 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines whether tax avoidance is associated with corporate debt policy. Specifically, this study investigates the influence of bond investors and financial institutions such as the banks, which are long-term loan owners, on corporate governance (CG) to determine comprehensively the relationship between tax avoidance and debt ratio. Note that, the financial institutions in Japan have a larger role in indirect finance policies, relative to in the European and U.S. financial markets, and that the financial institutions of the other Asian nations seem to take on the same level of responsibility as those of Japan.This study firstly investigates the association between debt ratio and corporate tax avoidance. Secondly, we examine the influence of effectiveness of debt governance on debt ratio and CG. Thirdly, we focus on the representative tools, such as outside directors and auditors for CG and corporate tax avoidance. Finally, we test the influence of the main banks on this effect because, in addition to their monitoring role, main banks also play a significant advisory role and are thus likely to be in a better position to make superior decisions about a firm's optimal debt and capital structure mix.According to the main result of this study, it seems that the debt enhancement effect is more dominant than the debt substitution effect in Japanese firms. When tax avoidance increases, firms' profitability rise. Thus, considering the ability to afford a loan from a financial institution, the firms can borrow more. With regard to interactive effects among CG, debt policy, and tax avoidance, we find the CG of firms strengthens when they carry out tax avoidance. If the outside director ratio increases, then the monitoring function of the debtholders improves due to the enhancement of CG functions, and our result suggests that the financial institutions in Japan achieve an effective monitoring function.
Book Synopsis International Corporate Tax Avoidance: A Review of the Channels, Magnitudes, and Blind Spots by : Sebastian Beer
Download or read book International Corporate Tax Avoidance: A Review of the Channels, Magnitudes, and Blind Spots written by Sebastian Beer and published by International Monetary Fund. This book was released on 2018-07-23 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Tax Avoidance and Capital Structure by : Alessandro Gabrielli
Download or read book Tax Avoidance and Capital Structure written by Alessandro Gabrielli and published by Springer Nature. This book was released on 2023-05-23 with total page 103 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides a comprehensive overview of the implications of tax avoidance for a firm’s capital structure, highlighting the key role played by free cash flow and agency conflicts. First, the book provides an outline of the theories and empirical evidence concerning the role of taxes in the Theory of Capital Structure. It reviews the studies investigating the relationship between agency conflicts and capital structure. The book explores the role of free cash flow and agency conflicts in the relationship between tax avoidance and capital structure. In the final section, the results of an empirical investigation conducted on a sample of U.S. public firms are also presented. The empirical research examines whether and how tax avoidance is associated with debt covenant violation across the stages of the corporate life cycle. Specifically, the research uses the concept of the corporate life cycle stage to analyse whether and how the association between tax avoidance and debt covenant violation varies in different agency settings. Consistent with the hypotheses drawn on the Agency Theory, the findings of the empirical research suggest life cycle stages moderate the association between tax avoidance and debt covenant violation. Overall, this book sheds light on the potential implications of tax avoidance activities for a firm’s capital structure. The book will be of interest to both experienced and early-stage scholars interested in the topic. Moreover, the book will also be of interest to policymakers, investors, analysts, lenders, and other market participants.
Book Synopsis Tax Avoidance Activities of U.S. Multinational Corporations by : Sonja Lynne Olhoft
Download or read book Tax Avoidance Activities of U.S. Multinational Corporations written by Sonja Lynne Olhoft and published by . This book was released on 1999 with total page 224 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Do Taxes Affect Corporate Debt Policy? by : Roger H. Gordon (Economy : Taxes.)
Download or read book Do Taxes Affect Corporate Debt Policy? written by Roger H. Gordon (Economy : Taxes.) and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Curbing Corporate Debt Bias by : Ruud A. de Mooij
Download or read book Curbing Corporate Debt Bias written by Ruud A. de Mooij and published by International Monetary Fund. This book was released on 2017-02-10 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Do Taxes Affect Corporate Debt Policy? Evidence from Us Corporate Tax Return Data by : Roger H. Gordon
Download or read book Do Taxes Affect Corporate Debt Policy? Evidence from Us Corporate Tax Return Data written by Roger H. Gordon and published by . This book was released on 2001 with total page 27 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.
Book Synopsis Effects of Taxation by : Dan Throop Smith
Download or read book Effects of Taxation written by Dan Throop Smith and published by . This book was released on 1952 with total page 328 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis CEO Inside Debt Incentives and Corporate Tax Policy by : Sabrina Chi
Download or read book CEO Inside Debt Incentives and Corporate Tax Policy written by Sabrina Chi and published by . This book was released on 2014 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the relation between CEO inside debt holdings (pension benefits and deferred compensation) and corporate tax avoidance. Because inside debt holdings are generally unsecured and unfunded liabilities of the firm, CEOs are exposed to risk similar to that faced by outside creditors. As such, theory suggests that inside debt holdings negatively impact CEO risk-appetite. To the extent that aggressive tax policies involve significant cash flow shortfalls, high cash flow volatility, and losses in firm and CEO reputation in the future, we expect that inside debt holdings will curb CEOs from engaging in risky tax strategies. Consistent with the prediction, we document a negative association between CEO inside debt holdings and tax avoidance. Overall, our results highlight the importance of investigating the implication of CEO debt-like compensation for firm tax policies.
Book Synopsis Corporate Tax Avoidance and Debt Costs by : Terry J. Shevlin
Download or read book Corporate Tax Avoidance and Debt Costs written by Terry J. Shevlin and published by . This book was released on 2019 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use path analysis to investigate how corporate tax avoidance is priced in bond yields and bank loan spreads. We find that approximately one half of the total effect of tax avoidance on bond yields is explained through the negative effect of tax avoidance on future pre-tax cash flow levels and volatility and, to a lesser extent, lower information quality. The effects of these mediating variables are much less pronounced for bank loan spreads. The results of additional cross-sectional analyses indicate that, relative to bond investors, banks are able to reduce information asymmetry problems more effectively, given their access to firms' private information and greater ability to monitor borrowers.
Book Synopsis Tax and Corporate Governance by : Wolfgang Schön
Download or read book Tax and Corporate Governance written by Wolfgang Schön and published by Springer Science & Business Media. This book was released on 2008-03-12 with total page 423 pages. Available in PDF, EPUB and Kindle. Book excerpt: Academic research shows that well-known principal-agent and capital market problems are strongly influenced by tax considerations. Against this background, this volume is the first to present a fully-fledged overview of the interdependence of tax and corporate governance. Not only the basic political, legal and economic questions but also major topics like income measurement, shareholding structures, corporate social responsibility and tax shelter disclosure are covered.
Book Synopsis Do Creditors Influence Corporate Tax Planning? Evidence from Loan Covenants by : Kirsten A. Cook
Download or read book Do Creditors Influence Corporate Tax Planning? Evidence from Loan Covenants written by Kirsten A. Cook and published by . This book was released on 2019 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines how creditor interventions after debt covenant violations affect corporate tax avoidance. Using a regression discontinuity design, we find that creditor interventions increase borrowers' tax avoidance. This effect is concentrated among firms with weaker shareholder governance before creditor interventions and among those with less bargaining power during subsequent debt renegotiations. Our results indicate that creditors play an active role in shaping corporate tax policy outside of bankruptcy.
Book Synopsis Tax Shelters and Corporate Debt Policy by : John R. Graham
Download or read book Tax Shelters and Corporate Debt Policy written by John R. Graham and published by . This book was released on 2005 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use a novel sample of 44 tax shelter cases involving public corporations to investigate which types of firms shelter, the magnitude of the tax shelters they use, and whether participating in a shelter affects corporate debt policy. The propensity to shelter increases with firm size, profitability, Ramp;D expenditures, foreign operations, and the market to book ratio. The average deduction produced by the shelters in our sample is very large, equaling approximately nine percent of asset value. This is about three times as large as interest deductions for comparable firms.Our results suggest that corporations substitute away from debt when using tax shelters. Seven years before they engage in sheltering activity, shelter firms have mean debt ratios of about 25 percent, roughly equivalent to matched firm debt ratios. By the year of the sheltering activity, shelter firm debt ratios have fallen to approximately 18 percent while matched firm debt ratios have not fallen. These results help explain why some firms appear to be under-levered when tax-sheltering activity is ignored, and also why corporate tax payments have fallen so precipitously in recent years.
Book Synopsis Tax Policy, Leverage and Macroeconomic Stability by : International Monetary Fund. Fiscal Affairs Dept.
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.
Book Synopsis Debt Bias and Other Distortions by : International Monetary Fund. Fiscal Affairs Dept.
Download or read book Debt Bias and Other Distortions written by International Monetary Fund. Fiscal Affairs Dept. and published by International Monetary Fund. This book was released on 2009-12-06 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: Tax distortions are likely to have encouraged excessive leveraging and other financial market problems evident in the crisis. These effects have been little explored, but are potentially macro-relevant. Taxation can result, for example, in a net subsidy to borrowing of hundreds of basis points, raising debt-equity ratios and vulnerabilities from capital inflows. This paper reviews key channels by which tax distortions can significantly affect financial markets, drawing implications for tax design once the crisis has passed.
Book Synopsis Addressing Base Erosion and Profit Shifting by : OECD
Download or read book Addressing Base Erosion and Profit Shifting written by OECD and published by OECD Publishing. This book was released on 2013-02-12 with total page 91 pages. Available in PDF, EPUB and Kindle. Book excerpt: This report presents studies and data available regarding the existence and magnitude of base erosion and profit shifting (BEPS), and contains an overview of global developments that have an impact on corporate tax matters.
