Thin Capitalization Rules and Multinational Firm Capital Structure is popular PDF and ePub book, written by Jennifer Blouin in 2014-01-24, it is a fantastic choice for those who relish reading online the Business & Economics genre. Let's immerse ourselves in this engaging Business & Economics book by exploring the summary and details provided below. Remember, Thin Capitalization Rules and Multinational Firm Capital Structure can be Read Online from any device for your convenience.
Thin Capitalization Rules and Multinational Firm Capital Structure Book PDF Summary
This paper examines the impact of thin capitalization rules that limit the tax deductibility of interest on the capital structure of the foreign affiliates of US multinationals. We construct a new data set on thin capitalization rules in 54 countries for the period 1982-2004. Using confidential data on the internal and total leverage of foreign affiliates of US multinationals, we find that thin capitalization rules significantly affect multinational firm capital structure. Specifically, restrictions on an affiliate’s debt-to-assets ratio reduce this ratio on average by 1.9%, while restrictions on an affiliate’s borrowing from the parent-to-equity ratio reduce this ratio by 6.3%. Also, restrictions on borrowing from the parent reduce the affiliate’s debt-to-assets ratio by 0.8%, which shows that rules targeting internal leverage have an indirect effect on the overall indebtedness of affiliate firms. The impact of capitalization rules on affiliate leverage is higher if their application is automatic rather than discretionary. Furthermore, thin capitalization regimes have aggregate firm effects: they reduce the firm’s aggregate interest expense but lower firm valuation. Overall, our results show than thin capitalization rules, which thus far have been understudied, have a substantial effect on the capital structure within multinational firms, with implications for the firm’s market valuation.
Detail Book of Thin Capitalization Rules and Multinational Firm Capital Structure PDF
- Author : Jennifer Blouin
- Release : 24 January 2014
- Publisher : International Monetary Fund
- ISBN : 9781484384640
- Genre : Business & Economics
- Total Page : 37 pages
- Language : English
- PDF File Size : 20,9 Mb
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