Universität zu Köln

Buettner, Thiess, Overesch, Michael ORCID: 0000-0002-1531-0357 and Wamser, Georg (2016). Restricted interest deductibility and multinationals' use of internal debt finance. International Tax and Public Finance, 23 (5). 785 - 798. DORDRECHT: SPRINGER. ISSN 1573-6970

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Abstract

This paper reconsiders the role of interest deductibility for internal debt financing of multinational corporations (MNCs). We provide quasi-experimental evidence using restrictions on interest deductibility through thin-capitalization rules. Explicitly distinguishing between firms subject to a binding restriction and unrestricted firms, a panel data sample selection model is used to explore the tax sensitivity of the capital structure of foreign subsidiaries of MNCs. Our results confirm that the tax incentive for using internal loans is effectively removed for restricted subsidiaries. While internal debt financing of unrestricted subsidiaries positively responds to taxes, the effects are relatively small.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Buettner, Thiess UNSPECIFIED UNSPECIFIED UNSPECIFIED Overesch, Michael UNSPECIFIED orcid.org/0000-0002-1531-0357 UNSPECIFIED Wamser, Georg UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-261898
DOI:	10.1007/s10797-015-9386-8
Journal or Publication Title:	International Tax and Public Finance
Volume:	23
Number:	5
Page Range:	785 - 798
Date:	2016
Publisher:	SPRINGER
Place of Publication:	DORDRECHT
ISSN:	1573-6970
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	Management and auxiliary services
Uncontrolled Keywords:	Keywords Language THIN-CAPITALIZATION RULES; STRUCTURE CHOICE; TAXATION; IMPACT; FIRMS Multiple languages Economics Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/26189