Taxation And Capital Structure Choice: Survey evidence

Author(s)

Hedia TERAOUI , Jameleddine CHICHTI ,

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Volume 1 - April 2012 (04)

Abstract

The purpose of this paper is to examine the behavior of practitioners about the corporate investment and financing choices by treating empirically several issues that revolve around a central axis: the study of the impact of taxation on the financial structure through a qualitative analysis by questionnaire sent to Tunisian managers. The choice of this method of analysis is justified by the importance of investigation on the positioning of taxation as a tool of government policy in the choice of financing strategies. This investigation is in line with a range of American researches (Norton (1991) and Graham and Harvey (2003)). The trade-off theory is confirmed by the importance of a target debt ratio in general but also specifically by the tax effects and bankruptcy costs. The results reflect the importance of interest deductibility in which is an important advantage that encourages leaders to use debt as a major source of financing. This study has also shown the importance of the non-debt tax shields on the capital structure choice. The majority of respondents state that these taxadvantages are complementary. 

Keywords

Taxation, capital structure, tax- advantages of debt, non-debt tax shields 

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