This article aims to analyze the link between subsidiary capital structure and taxation in Europe. First we introduce a trade-off model, which looks at a MNC’s financial strategy and in particular debt shifting from low-tax to high-tax jurisdictions. By letting the MNC choose both leverage and...

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...

This paper analyzes the relationship between corporate taxation, firm age and debt. We adapt a standard model of capital structure choice under corporate taxation, focusing on the financing and investment decisions a firm is typically faced with. Our model suggests that the debt ratio is...

Thin capitalization rules have become an important element in the corporate tax systems of developed countries. This paper sets up a model where national and multinational firms choose tax-efficient financial structures and countries compete for multinational firms through statutory tax rates...

This paper is concerned with the shifting of taxable profits by means of borrowing and lending between affliates of multinational corporations. Empirical evidence is provided using microlevel panel data of virtually all German multinationals made available by the German Central Bank...