1. Corporate tax, capital structure, and the accessibility of bank loans: Evidence from China
- Author
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Wu, Liansheng and Yue, Heng
- Subjects
Banks (Finance) -- Taxation ,Bank loans -- Taxation ,Corporations -- Taxation ,Capital structure ,Tax rates ,Banking, finance and accounting industries ,Business - Abstract
To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jbankfin.2006.10.030 Byline: Liansheng Wu, Heng Yue Keywords: Capital structure; Tax; Bank loans; China Abstract: In this paper, we investigate whether listed firms in China adjust their capital structure in response to an increase in the corporate tax rate. Although theories of capital structure suggest that corporate tax is an important determinant of capital structure, how exogenous changes of the tax rate affect firms' leverage decisions has not been fully explored. We examine a unique circumstance in which the Chinese government increased the corporate tax rate of firms that had previously received local government tax rebates. The evidence indicates that these firms increased their leverage when the corporate tax rate increased. Further investigation suggests that the adjustment of leverage was mostly driven by firms with a high level of access to bank loans. Author Affiliation: Guanghua School of Management, Peking University, Beijing 100871, China Article History: Received 27 March 2006; Accepted 26 October 2006
- Published
- 2009
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