Zeitschrift für Betriebswirtschaft

, Volume 81, Issue 12, pp 1325–1339 | Cite as

Corporation taxes and the debt policy of multinational firms

Evidence for German multinationals
  • Thiess Buettner
  • Michael Overesch
  • Ulrich Schreiber
  • Georg Wamser


This paper analyzes the impact of corporate taxes on the capital structure of foreign subsidiaries of multinational firms. The empirical investigation employs a large micro-level panel dataset of German multinationals covering 31 countries over a 10-year period. A special feature of this dataset is that it allows us to distinguish between internal and external debt financing. Our results confirm a positive effect of local tax rates on both types of debt. Moreover, while adverse local credit market conditions are found to reduce external borrowing, internal debt is increasing, supporting the view that the two channels of debt finance are substitutes. Our findings suggest that internal credit markets give rise to significant advantages and enhance multinationals’ opportunities to use debt as a tax shield.


Multinational corporation Capital structure Corporate income taxation Internal debt External debt Firm-level data 

JEL Classification

G32 H25 F23 


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Copyright information

© Gabler Verlag 2011

Authors and Affiliations

  • Thiess Buettner
    • 1
  • Michael Overesch
    • 2
  • Ulrich Schreiber
    • 3
  • Georg Wamser
    • 4
  1. 1.Chair of Economics, esp. Public FinanceFriedrich Alexander University Erlangen-NurembergNurembergGermany
  2. 2.Chair of Business Administration, esp. TaxationGoethe-University FrankfurtFrankfurtGermany
  3. 3.Chair of Business Administration and TaxationUniversity of MannheimMannheimGermany
  4. 4.Chair of Applied Economics: Innovation and InternationalisationETH ZurichZurichSwitzerland

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