I investigate how the capital structure of firms is affected by uncertainty about the legal outcomes of corporate tax law. I create a simple model in which firms choose to either avoid taxes aggressively or conservatively, based on enforcement of laws and uncertainty about outcomes of the legal process. This theory shows under which conditions firms will avoid conservatively by using debt tax s...

I integrate under firm-specific benefit functions to estimate that the capitalized tax benefit of debt equals 9.7 percent of firm value (or as low as 4.3 percent, net of personal taxes). The typical firm could double tax benefits by issuing debt until the marginal tax benefit begins to decline. I infer how aggressively a firm uses debt by observing the shape of its tax benefit function. Paradox...

this paper, i have focused on the tax side of the fiscal policy to  investigate the past and future behavior of fiscal sustainability in iran. to do so, i have employed two different forward-looking and backward-looking approaches. first, the backward-looking approach is the fiscal policy rule proposed by daving & leeper (2011). precisely, this rule determines that whether the fiscal policy is ...

Article history: Received 12 November 2009 Received in revised form 27 July 2010 Accepted 28 July 2010 Available online 6 August 2010 We provide new evidence that differences in international tax rates and tax regimes affect multinational firms' debt location decisions. Our sample contains 8287 debt issues from 2437 firms headquartered in 23 different countries with debt-issuing subsidiaries in...

Prior research has documented evidence that entrenched managers tend to avoid debt. Contrary to this evidence, I find that firms with weak shareholder rights, as measured by the Gompers et al. (2003) governance index, actually use more debt finance and have higher leverage ratios. I provide an explanation by showing that entrenched managers choose conservative (safe) investment policies and the...

This paper aims to examine whether effective tax rate and firm-specific factors (such as firm size, growth opportunities, tangibility, risk, profitability, non-debt shields liquidity) impact the capital structure of multinational firms in energy sector. We employ regression models consisting OLS, fixed effect random test balanced panel dataset based UK USA over period 2011–2019. show a positive...

The traditional view is that interest deductibility encourages firms to use debt financing; however, some argue that the personal tax disadvantage to interest offsets the corporate tax advantage. This paper investigates the degree to which personal taxes affect corporate financing decisions. In crosssectional regressions that control for personal taxes, debt usage is positively correlated with ...

We study several important tax-related issues related to the measurement and use of corporate marginal tax rates. First, we develop an AR(1) method to simulate corporate marginal income tax rates and demonstrate that the AR(1) model improves upon the extant random walk and bin approaches. The new AR(1) approach captures firm-specific features, including mean-reversion in taxable income. Second,...