Antonio De Vito and Martin Jacob: The Role of Creditor Protection in Lending and Tax Avoidance (November 9, 2020)

Antonio De Vito and Martin Jacob, of IE University and WHU – Otto Beisheim School of Management, respectively, have made available for download their article, The Role of Creditor Protection in Lending and Tax Avoidance, available in SSRN. The abstract is as followed:

We examine how creditor rights affect the trade-off between non-debt and debt tax shields. Using four bankruptcy reforms, a panel of private and public firms, and tax return data from Italy, we show that laws empowering creditors reduce tax avoidance and increase debt financing, consistent with firms substituting non-debt tax shields with debt tax shields. We corroborate the validity of our findings using a panel of public firms across 33 countries. We document that the impact of creditor protection laws is mitigated by tax system characteristics, which significantly reduce the incentives to substitute tax avoidance with debt.

To see the full article, click: The Role of Creditor Protection in Lending and Tax Avoidance by Antonio De Vito and Martin Jacob.

Posted by Jessica Ji, Associate Editor, Wealth Strategies Journal.

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