Existing theories of a firm’s optimal capital structure seem to fail in explaining why many healthy and profitable firms rely heavily on equity financing, even though benefits associated with debt (like tax shields) appear to be high and the bankruptcy risk low. This holds in particular for...

This paper examines the impact of thin capitalization rules that limit the tax deductibility of interest on the capital structure of the foreign affiliates of US multinationals. We construct a new data set on thin capitalization rules in 54 countries for the period 1982-2004. Using confidential...

Multinational companies can exploit the tax advantage of debt more aggressively than national companies by shifting debt from affiliates in low tax countries to affiliates in high tax countries. Previous papers have either omitted internal debt or external debt from the analysis. We are the...

Tax neutrality towards alternative financing instruments for corporate investment is a ubiquitous demand in the political debate. At the same time, the literature is surprisingly silent about the magnitude of possible efficiency costs of a departure from tax neutrality. Againstthis background,...

The paper aims at empirically investigating the relationship between regulation and the capital structure of the regulated firm, A key aspect of the referred relationship pertains a leverage effect according to which debt could be increased as a response to previous physical capital investment...

This paper provides empirical evidence on two potential costs of shared ownership of German affiliates abroad. First, in periods of currency crises, wholly-owned affiliates, in contrast to partially-owned affiliates, seem to circumvent financial constraints by accessing capital from their parent...

This paper proposes a novel regularisation method for the estimation of large covariance matrices, which makes use of insights from the multiple testing literature. The method tests the statistical significance of individual pair-wise correlations and sets to zero those elements that are not...

We examine how regularly scheduled macroeconomic announcements for the U.S., Germany and the euro area affect the German stock market, using high–frequency, minute–by–minute DAX data. Our study extends the literature on high–frequency announcement effects in several ways. First, we...

This paper deals with three aspects of spectacular oil price episodes such as the one witnessed in 2008. First, the concept of temporary explosiveness is proposed as an empirical method for capturing this type of behavior. The application of a recently proposed recursive unit root test shows...

We employ a wavelet approach and conduct a time-frequency analysis of dynamic correlations between pairs of key traded assets (gold, oil, and stocks) covering the period from 1987 to 2012. The analysis is performed on both intra-day and daily data. We show that heterogeneity in correlations...