The Tax Effect on Capital Structure: An empirical investigation of tax shield utilization following the Tax Cuts and Jobs Act
(2020) BUSN79 20201Department of Business Administration
- Abstract
- Mixed support regarding firm capital structure reaction to the Tax Cut and Jobs Act is found. In the main difference-in-differences estimation, support is found for the predictions of trade-off theory after the inclusion of control variables aiming to capture shareholder distribution and capital structure optimization. These results do not prove robust to a more granular matching procedure. A unique contribution is made through the results indicating that even large tax changes may be unable to provoke a downward reaction in leverage ratios. Further, this study exemplifies that to draw meaningful conclusions from policy changes on taxes, standard difference-in-differences estimations may not suffice.
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9023721
- author
- Rodin, Adam LU and Magnusson, Patrik
- supervisor
- organization
- course
- BUSN79 20201
- year
- 2020
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Financial policy, difference-in-differences, capital structure, static trade-off theory, dynamic trade-off theory
- language
- English
- id
- 9023721
- date added to LUP
- 2020-08-21 14:08:14
- date last changed
- 2020-08-21 14:08:14
@misc{9023721, abstract = {{Mixed support regarding firm capital structure reaction to the Tax Cut and Jobs Act is found. In the main difference-in-differences estimation, support is found for the predictions of trade-off theory after the inclusion of control variables aiming to capture shareholder distribution and capital structure optimization. These results do not prove robust to a more granular matching procedure. A unique contribution is made through the results indicating that even large tax changes may be unable to provoke a downward reaction in leverage ratios. Further, this study exemplifies that to draw meaningful conclusions from policy changes on taxes, standard difference-in-differences estimations may not suffice.}}, author = {{Rodin, Adam and Magnusson, Patrik}}, language = {{eng}}, note = {{Student Paper}}, title = {{The Tax Effect on Capital Structure: An empirical investigation of tax shield utilization following the Tax Cuts and Jobs Act}}, year = {{2020}}, }