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’.
Presentations: EFMA 2018 annual meeting (nominated for John A. Doukas PhD. Conference Award), CEPR symposium 2018 (poster session), AFA annual meeting 2018 (poster session), EAA annual meeting 2018, FEBS 2018 annual meeting
Working papers
Debt and Taxes: The Role of Tax Avoidance - R&R
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.
Presentations: NV-FEB conference 2024
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.
Presentations: EFMA 2019 annual meeting (winner John A. Doukas PhD. Conference Award), 5th Berlin-Vallendar Conference on Tax Research, AFA 2018 annual meeting (poster session), Global Finance Conference 2018, Oxford Finance Job Market Workshop 2018, EAA Annual meeting 2023
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.
Presentations: 6th Berlin-Vallendar Conference on Tax Research, EAA annual meeting 2021