Estimating the impact of corporate income tax changes to public companies’ capital structure inside European Union
Loading...
Journal Title
Journal ISSN
Volume Title
School of Business |
Bachelor's thesis
Unless otherwise stated, all rights belong to the author. You may download, display and print this publication for Your own personal use. Commercial use is prohibited.
Author
Date
2017
Department
Major/Subject
Mcode
Degree programme
Rahoitus
Language
en
Pages
30
Series
Abstract
I investigate the tax sensitivity of European public companies’ capital structure decisions to corporate tax changes made in their home country. The research covers all the tax changes made inside the current 28 member states during the 1980-2016 period. The research is made by using difference-in-difference model which compares the firms affected by tax change to other control groups with no tax changes. Within two years, companies lower their leverage on average by 45 basis points in case of tax decrease. Contrary to trade-off theory, long-term leverage seems to response only to tax cuts, not increases. In addition to the full sample of all firms, I also test the tax responsiveness of different control groups based on the, distress levels, location of sales, profitability and dividend payout. The tax sensitivity is greatest among profitable firms and firms with only domestic sales.Description
Thesis advisor
Rantapuska, EliasKeywords
capital structure, debt policy, corporate tax, trade-off theory, difference-in-difference
