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...

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 chapter reviews the literature providing empirical estimates on the tax elasticity of multinational profits and discusses the challenges faced when attempting to quantify tax-motivated profit shifting. We first use micro-level data to show that multinational corporations hold a...

This paper studies tax policy interaction among local governments for both mobile and immobile tax bases. We exploit exogenous changes in the local tax setting of German municipalities due to participation in state debt reduction programs to learn about the size, scope and nature of strategic...

We exploit exogenous variation in tax notches created by controlled foreign corporation (CFC) rules to better understand the profit-shifting behavior of multinational enterprises (MNEs) and its consequences for real activity. Using new data on CFC rules and information on direct parent-affiliate...

This paper investigates the tax responsiveness of multinational firms' investment decisions in foreign countries, distinguishing firms that are able to avoid taxes (avoiders) from those that are not (non-avoiders). From a theoretical point of view, the tax responsiveness of firms crucially...

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 shows that the cost of enforcing contracts governing non-financial relationships between firms affects a firm’s financing structure. We analyze the interaction between a firm’s capital structure and the type of contracts it uses to deal with its suppliers. We first develop a...