Do Taxes Affect Corporate Financing Decisions?
Working Paper 2632
DOI 10.3386/w2632
Issue Date
A new empirical method and data set are used to study the effects of tax policy on corporate financing choices. Clear evidence emerges that non-debt tax shields "crowd out" interest deductibility, thus decreasing the desirability of debt issues at the margin. Previous studies which failed to find tax effects examined debt-equity ratios rather than individual, well-specified financing choices. This paper also demonstrates the importance of controlling for confounding effects which other papers ignored. Results on other (asymmetric information) effects on financing decisions are also presented.
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Copy CitationJeffrey MacKie-Mason, "Do Taxes Affect Corporate Financing Decisions?," NBER Working Paper 2632 (1988), https://doi.org/10.3386/w2632.
Published Versions
Journal of Finance, December 1990. citation courtesy of