Corporate Financing & Taxation: A Dynamic Panel Data Modelling
Published: 2014
Author(s) Name: Vanita Tripathi, Lalit Kumar |
Author(s) Affiliation: 1st Author is Asst. Prof. & 2nd Author is Scholar at Delhi School of Eco., Univ. of Delhi, India
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Abstract
Do prevailing corporate tax rates have any significant
impact on corporate financing decision? This is the most
controversial question in corporate finance. Theories
suggest a positive impact of corporate tax on debt
financing as interest is a tax deductible expense and
many empirical studies favour this. However, factors
dominating in Emerging economies differ from those
in developed economies as the priorities of the two are
different. Under situation where external capital inflow
plays a vital role in the development of the economy,
it would be interesting to see whether corporate tax
maintains its dominating position as suggested by
earlier studies. This paper examines this issue in detail
through dynamic panel data model for firms in India.
Keywords: Corporate Financing Decision, Taxation, Emerging Economies, Speed of Adjustment
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