Earticle

초록

영어

This paper examines the extent to which taxes affect internal versus external leverage by focusing on wholly-owned subsidiaries in Korea. Foreign subsidiaries are under classical system where double taxation of corporate and personal income provides interest tax shields, while domestic subsidiaries are under imputation system where such distortion between debt and equity is largely eliminated. We find that foreign subsidiaries do not exhibit higher overall leverage than domestic subsidiaries controlling for various firm characteristics. On the other hand, foreign subsidiaries exhibit higher internal leverage than domestic subsidiaries. We also find that foreign subsidiaries with excess foreign tax credit status use more internal debt when home country corporate tax rate is low. These findings suggest that taxes have first order impact on internal debt when marginal investor holds both debt and equity, but not on external debt possibly due to limited substitutability of comparable debt instruments.

목차

Abstract
 Introduction
 1. Literature Review
 2. Institutional Background: Imputation Tax System in Korea and Foreign Tax Credits
 3. Data and Sample
  A. Data Sources and Sample Construction
  B. Sample Description
 4. Empirical Results
  A. Univariate Analysis
  B. Multivariate Analysis
  C. Substitutability between Internal and External Debt
  D. The Effect of Foreign Tax Credits: Cross-sectional Analysis of Foreign Subsidiaries
 5. Conclusion
 References
 Appendix
 Table

키워드

저자

• Woojin Kim [ Associate Professor of Finance at Seoul National University Business School, Seoul, Korea. ]
• Hyojeong Lee [ Assistant Professor of Finance at Kwangwoon University Business School. ]

참고문헌

발행기관

간행물

표지보기 관심저널 등록

• 간행물명

  한국재무학회 학술대회

• 간기

  부정기

• 수록기간

  2006~2024

• 십진분류

  KDC 325 DDC 330