Publications
Debt and Taxes: The Role of Corporate Group Structure - Review of Finance (2024), 28(6), 2051-2082. https://doi.org/10.1093/rof/rfae024
I show that the corporate group structure of a company affects its capital structure as a result of the expected tax-deductibility of losses on subsidiaries. The literature has identified two effects of corporate income tax rates on capital structure: the ‘local income effect’ or trade-off theory effect, and the ‘substitution effect’, which predicts that multinational companies shift debt to countries where it yields the highest tax benefit. Using recent theories on corporate group structures, I empirically show that there is a third effect, that is sizeable and can work in the opposite direction of the ‘substitution effect’.
Presented at: EFMA Annual meeting (nominated for John A. Doukas PhD. Conference Award), CEPR symposium (poster session), EAA annual meeting, FEBS annual meeting, brown bag seminar Tilburg University, brown bag seminar Fuqua Business School
Debt and Taxes: The Role of Tax Avoidance - JFQA, Forthcoming
Empirically, the effect of corporate tax rates on leverage has been smaller than expected based on trade-off theory. In this paper, I show that tax avoidance functions as a non-debt tax shield, reducing the benefits of the debt tax shield. I find that higher tax rates cause higher non-debt tax avoidance, which crowds out the debt tax shield. This tax avoidance affects the strength of the relationship between debt and tax rates. A one standard deviation higher tax rate implies 2.8 percent higher leverage for low tax avoidance firms, but has a negative effect for high tax avoidance firms.
Presented at: EAA Annual meeting, NV-FEB conference, seminar Freie Universitat Berlin
Working papers
Tax planning and the Incompleteness of Corporate Tax Law (formerly known as "As Uncertain as Taxes")
Tax laws have to leave room for interpretation to ensure they can be applied to foreseen and unforeseen situations, making them comparable to an incomplete contract. In this paper, I investigate how this incompleteness of the corporate income tax law affects tax planning. I construct a novel measure for the incompleteness of the corporate income tax law and find that: 1) 1 standard deviation higher incompleteness is associated with 13% more profit shifted from high to low-tax countries. 2) The increased tax planning is associated with a 4.78p.p. lower effective tax rate.
Presented at: EFMA annual meeting (winner John A. Doukas PhD. Conference Award), Berlin-Vallendar Conference on Tax Research, AFA annual meeting (poster session), Global Finance Conference, EAA Annual meeting, Financial Engineering and Banking Society Annual Meeting, National Tax Association annual meeting, Oxford Finance Job Market Workshop, seminar Australian National University, seminar NOVA business school, seminar Universite Paris Dauphine, seminar Aalto University, seminar Copenhagen Business School, seminar BI Norwegian Business School, seminar Rotterdam School of Management, brown bag seminar Tilburg University
Work in Progress
The Real Effects of Tax Avoidance. (with Mikael Homanen)
Companies which avoid taxes have higher after-tax returns to investment than non-tax avoiding companies. This crowds out competitor investment and drives up their labor costs.
Presented at: Berlin-Vallendar conference on Tax research, ETHOS, RCN, Bayes Business School, EAA annual meeting
Family firm conflicts and succession. (with Charlotte Ostergaard)
Optimal concentration of control in family firm succession. (with Charlotte Ostergaard)
The effects of inheritance tax law on family firm sucession. (with Irena Kustec and Charlotte Ostergaard)
Taxes and the Valuation of VC-Backed Companies. (with Marco Da Rin)
The valuation of VC-backed companies is affected by changes in the corporate taxes. Using a real-options framework we show that this effect depends on the timing of the tax and the life-cycle of the VC-backed company.
Presented at: invited speaker at the 3rd WU Vienna Tax Camp, Dutch Workshop on Corporate Taxation, Brown bag seminar Tilburg University