Abstract
After more than 15 years with research on how taxes affect multinational firms' capital structure, there is little empirical evidence to support that multinational firms react more strongly to changes in the corporate income tax rate when compared with domestic firms. This paper postulates that a lack of ideal settings to study this question has lead to an underestimation of the tax sensitivity of debt in multinational corporations. Using a reform in Norway that abruptly removed subsidies of corporate debt, I find that affected firms sharply decrease their debt-to-assets ratio. The implied lower bound marginal tax effect on the debt-to-asset ratio is 0.45 which is substantially higher than the consensus estimate in the literature.
The seminar will be held in room 1249 (12th floor) at Eilert Sundts Hus. The address is Moltke Moes vei 31.