Brown Bag - Corporate Income Taxation, Leverage, and Entrepreneurial Firm's Growth
Marco Da Rin, Tilburg University
2017-04-27 at 12:00
2017-04-27 at 13:00
Swedish House of Finance, Drottninggatan 98, Stockholm
We ask whether tax policy affects, through corporate financial decisions, the growth of new entrepreneurial companies. We first document how taxation a¤ects the capital structure choices of newly incorporated firms. Second, we analyze the long-term e¤ects of tax policy on these firms’growth through their e¤ect on capital structure at entry. We find a statistically and economically relevant effect of corporate income taxation on capital structure at entry, on capital structure over time, and on firm survival and conditional growth over up to nine years after entry.
Our results contribute to literature on leverage dynamics as well as to the literature on the financing of entrepreneurial companies. This study is part of a broader research agenda on the effects of taxation on entry and corporate growth, on the effects of taxation on the corporate financial policies of private companies, and on entrepreneurial firms' dynamics.