Publication Type
Journal Article
Publication Date
1-2009
Abstract
In this paper, we investigate whether listed firms in China adjust their capital structure in response to an increase in the corporate taxrate. Although theories of capital structure suggest that corporate tax is an important determinant of capital structure, how exogenouschanges of the tax rate affect firms’ leverage decisions has not been fully explored. We examine a unique circumstance in which the Chinesegovernment increased the corporate tax rate of firms that had previously received local government tax rebates. The evidence indicatesthat these firms increased their leverage when the corporate tax rate increased. Further investigation suggests that the adjustment ofleverage was mostly driven by firms with a high level of access to bank loans.
Keywords
Capital structure, Tax, Bank loans, China
Discipline
Asian Studies | Taxation
Research Areas
Accounting Information System
Publication
Journal of Banking and Finance
Volume
33
Issue
1
First Page
30
Last Page
38
ISSN
0378-4266
Identifier
10.1016/j.jbankfin.2006.10.030
Publisher
Elsevier
Citation
WU, Liansheng and YUE, Heng.
Corporate tax, capital structure, and the accessibility of bank loans: Evidence from China. (2009). Journal of Banking and Finance. 33, (1), 30-38.
Available at: https://ink.library.smu.edu.sg/soa_research/1670
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.jbankfin.2006.10.030