Business, Management and Accounting
8 years ago

Local taxes drive multinationals to shift debt structure for financial advantage.

SSRN Electronic Journal
Taxation and Capital Structure Choice - Evidence from a Panel of German Multinationals
Thiess Buettner, Michael Overesch, Ulrich Schreiber, Georg Wamser

Paper Summary

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The article looks at how taxes and loan conditions affect the financial choices of multinational companies. They studied German companies in 26 countries from 1996 to 2003. The study found that higher local taxes lead to more debt, both internal and external. When local credit conditions are bad, companies borrow less externally but more internally.