Theory recommends aligning the tax treatment of debt and equity. A few countries, notably Belgium, have introduced an allowance for corporate equity (ACE) to achieve tax neutrality. We study the effects of adopting an ACE on debt financing, passive investment, and active investment of...

By introducing controlled-foreign-company (CFC) rules, the parent country of a multinational firm reserves the right to tax the income of the firm's foreign affiliates if the tax rate in the affiliate's host country is below a specified threshold. We identify the conditions under which binding...

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...

Tax provisions favoring corporate debt over equity finance ("debt bias") are widely recognized as a risk to financial stability. This paper explores whether and how thin-capitalization rules, which restrict interest deductibility beyond a certain amount, affect corporate debt ratios and mitigate...