Multinational enterprises (MNEs) manipulate the location of their debts to reduce their corporate tax burden. Indeed, by locating debts in higher-tax rate countries, MNEs can deduct interest payments against a higher tax rate. This paper provides evidence of such manipulation of debt location....

This paper analyzes the effectiveness of thin-capitalization rules in preventing debt finance by intercompany loans and explores their consequences for corporate decisions. A theoretical discussion emphasizes that limitations of the deduction of interest owed to foreign affiliates would not only...

Firms have the incentive to enhance debt financing with higher corporate tax rates due to the increased value of interest deductions from the tax base. However, external debt is relatively costly for corporations with a high firm-specific risk. Moreover, for multinationals, the shifting of...

This paper analyzes the impact of taxes and lending conditions on the financial structure of multinationals' foreign affiliates. The empirical analysis employs a large panel of affiliates of German multinationals in 26 countries in the period from 1996 until 2003. In accordance with the...

In this paper, I investigate the influence of tax incentives on the financial structures of mergers and acquisitions (M&A) conducted by multinational entities (MNE). Previous research has already found evidence for tax avoidance by debt shifting. I analyze the importance of locating debt at...

Corporate leverage responds differently to employees' rights in bankruptcy depending on whether it is driven by strategic concerns in wage bargaining or by credit constraints. Using novel data on employees' rights in bankruptcy, we estimate their impact on leverage, exploiting time-series,...

In this study we investigate the impact of the thin capitalization rule (TCR), introduced in Germany in 2008, on firms' capital structure, investment and profitability. The identification of the causal effects is based on the escape clauses in the regulation using a difference-in-difference...

Escape clauses, where small firms are exempt from particular tax rules, is a crucial feature of a number of corporate tax schemes, but creates incentives to avoid taxation by manipulating the measures that determine inclusion. We evaluate the impact of thin capitalization rules, which commonly...

Escape clauses, where small firms are exempt from particular tax rules, is a crucial feature of a number of corporate tax schemes, but creates incentives to avoid taxation by manipulating the measures that determine inclusion. We evaluate the impact of thin capitalization rules, which commonly...

Some multinationals use the parent company as a lender to the group, whereas others set up an internal bank in a low tax jurisdiction. This paper discusses the link between capital structure choices and tax planning motives in multinational groups. We model the trade-off between the use of...