The ongoing financial crisis so far cost the German financial sector 38 billion Euros due to losses on its mortgage-related subprime bank exposures. This paper looks for the impact of these losses on the real sector of the economy. First, the financial sector is looked at as part of the overall...

In the spirit of Harberger, we apply a dynamic computable general equilibrium (CGE) model and estimate the excess burden stemming from the tax-induced distortion in the allocation of capital across the corporate and the non-corporate sectors in Germany. In doing so, we perform a counterfactual...

We estimate firms' cash flow sensitivity of cash to empirically test how the financial system's structure and activity level influence their financial constraints. For this purpose we merge Almeida, Campello and Weisbach (2004), a pathbreaking new design for evaluating a firm's financial...

This study uses a switching regression framework with known sample separation to analyze the effects of corporate income taxation on investment in case of binding and non-binding financial constraints. By employing two different sample splitting criteria, payout behavior and the ratio of...

This paper investigates whether self-employed households use consumer loans - in particular instalment loans and overdrafts - to finance business activities. Controlling for financial and non-financial household variables we show that self-employed households particularly use personal overdrafts...

We study the effects of a unique lending program initiated by the Swedish government at the height of the financial crisis that allowed firms to suspend payment of all labor-related taxes and fees. Comprehensive administrative data on all Swedish firms show that firms borrowing from the program...

We analyze the role of public support in the financing pattern of R&D in German SMEs and their assessment of financing conditions in the context of other framework conditions for innovation. In Germany, there is a diversity of overall well-funded technology-neutral and technology-specific...

Using Dutch data we empirically investigate how financing and innovation vary across firm characteristics. We find that when firms face financial constraints, debt financing and innovation choices are not independent of firm characteristics, and R&D slows down. In the absence of financial...

Bank intermediated finance has been cited frequently as the preferred means for channeling funds from savers to firms. Germany is the prototypical economy where universal banks allegedly exert substantial influence over firms. Despite frequent assertions about the considerable power of German...

The tax bias in favour of debt finance under the corporate income tax means that corporate debt ratios exceed the socially optimal level. This creates a rationale for thin-capitalization rules limiting the amount of debt that qualifies for interest deductibility. This paper sets up a model of...