Pouring Oil on Fire : Interest Deductibility and Corporate Debt /
This paper investigates the role of tax incentives towards debt finance in the buildup of leverage in the nonfinancial corporate (NFC) sector, using a large firm-level dataset. We find that so-called debt bias is a significant driver of leverage, for both small and medium-sized enterprises and large...
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| Format: | Book |
| Language: | English |
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Washington, D.C. :
International Monetary Fund,
2018
[Place of publication not identified] : 2018 |
| Series: | IMF Working Papers; Working Paper ;
No. 2018/257 IMF eLibrary |
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| Summary: | This paper investigates the role of tax incentives towards debt finance in the buildup of leverage in the nonfinancial corporate (NFC) sector, using a large firm-level dataset. We find that so-called debt bias is a significant driver of leverage, for both small and medium-sized enterprises and larger firms, with its effect accounting for about a quarter of leverage. The strength of this effect differs with firm size, the availability of collateral, income and income volatility, cash flow, and capital intensity. We conclude that leveling the playing field between debt and equity finance through tax policy reform would decrease NFC leverage, reducing economic risks posited by leverage |
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| Item Description: | Part of the IMF eLibrary collection Title from content provider |
| Physical Description: | 1 online resource (42 pages) 1 online resource |
| ISBN: | 1484389107 : |
| ISSN: | 1018-5941 |
| Access: | License restrictions may limit access Restricted for use by site license |