Thin Capitalization Rules and Multinational Firm Capital Structure:
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...
Gespeichert in:
| 1. Verfasser: | |
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| Format: | Elektronisch E-Book |
| Sprache: | English |
| Veröffentlicht: |
Washington, D.C
International Monetary Fund
2014
|
| Schriftenreihe: | IMF Working Papers
Working Paper No. 14/12 |
| Online-Zugang: | UBW01 UEI01 LCO01 SBR01 UER01 SBG01 UBG01 FAN01 UBT01 FKE01 UBY01 UBA01 FLA01 UBM01 UPA01 UBR01 FHA01 FNU01 BSB01 TUM01 Volltext |
| Zusammenfassung: | 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 |
| Beschreibung: | 1 Online-Ressource (37 p) |
| ISBN: | 148438444X 9781484384442 |
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| index_date | 2024-07-03T20:13:37Z |
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| owner_facet | DE-20 DE-824 DE-70 DE-155 DE-BY-UBR DE-29 DE-22 DE-BY-UBG DE-473 DE-BY-UBG DE-1102 DE-703 DE-859 DE-706 DE-384 DE-860 DE-19 DE-BY-UBM DE-739 DE-355 DE-BY-UBR DE-Aug4 DE-1049 DE-12 DE-91 DE-BY-TUM |
| physical | 1 Online-Ressource (37 p) |
| psigel | ZDB-1-IMF |
| publishDate | 2014 |
| publishDateSearch | 2014 |
| publishDateSort | 2014 |
| publisher | International Monetary Fund |
| record_format | marc |
| series2 | IMF Working Papers |
| spelling | Blouin, Jennifer Verfasser aut Thin Capitalization Rules and Multinational Firm Capital Structure Blouin, Jennifer Washington, D.C International Monetary Fund 2014 1 Online-Ressource (37 p) txt rdacontent c rdamedia cr rdacarrier IMF Working Papers Working Paper No. 14/12 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 Online-Ausg Huizinga, Harry Sonstige oth Laeven, Luc Sonstige oth Nicodeme, Gaetan Sonstige oth http://elibrary.imf.org/view/IMF001/21106-9781484384442/21106-9781484384442/21106-9781484384442.xml Verlag URL des Erstveröffentlichers Volltext |
| spellingShingle | Blouin, Jennifer Thin Capitalization Rules and Multinational Firm Capital Structure |
| title | Thin Capitalization Rules and Multinational Firm Capital Structure |
| title_auth | Thin Capitalization Rules and Multinational Firm Capital Structure |
| title_exact_search | Thin Capitalization Rules and Multinational Firm Capital Structure |
| title_exact_search_txtP | Thin Capitalization Rules and Multinational Firm Capital Structure |
| title_full | Thin Capitalization Rules and Multinational Firm Capital Structure Blouin, Jennifer |
| title_fullStr | Thin Capitalization Rules and Multinational Firm Capital Structure Blouin, Jennifer |
| title_full_unstemmed | Thin Capitalization Rules and Multinational Firm Capital Structure Blouin, Jennifer |
| title_short | Thin Capitalization Rules and Multinational Firm Capital Structure |
| title_sort | thin capitalization rules and multinational firm capital structure |
| url | http://elibrary.imf.org/view/IMF001/21106-9781484384442/21106-9781484384442/21106-9781484384442.xml |
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