Research

Working papers

As Uncertain as Taxes 

Tax law must leave room for interpretation to be widely applicable. This room for interpretation creates 'legal uncertainty' and consequently opportunities for tax planning. I construct a novel measure of 'legal uncertainty' and show that higher ‘legal uncertainty’ affects multinational’s financial decisions and tax planning behavior by causing substitution of non-debt tax planning for debt-based planning. This substitution can help explain why the prior literature finds that leverage underreacts to tax-rate changes, as non-debt tax planning reduces the need for debt-based tax planning. The strength of the effect decreases when the probability of tax audits is high.  

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

Debt and Taxes: The Role of Corporate Group Structure               R&R RF

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

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

Tax Avoidance and New Firm Entry. (with Mikael Homanen)

Tax avoidance increases after-tax returns. Companies can use this benefit to create barriers to entry, reducing new firm entry.