Effects of ultimate ownership structure and corporate tax on capital structures: Evidence from Taiwan

Cheng Few Lee; Nan Ting Kuo

doi:10.1016/j.iref.2013.07.004

Effects of ultimate ownership structure and corporate tax on capital structures: Evidence from Taiwan

Cheng Few Lee, Nan Ting Kuo

Rutgers Business School, Finance & Economics

Research output: Contribution to journal › Article › peer-review

18 Scopus citations

Abstract

Our study investigates how ultimate ownership structure and the corporate tax rate affect the equilibrium trade-off relation between manager ownership and debt in reducing agency costs. Considering the presence of the controlling shareholder, we find that higher corporate tax rates strengthen the trade-off relation between manager ownership and debt while higher control rights held by the controlling shareholder weaken it as well as the strengthening effect of corporate tax rate. Our study contributes to the literature by revealing tax and ultimate ownership structure dimensions and their interactions as additional determinants of corporate capital structure.

Original language	English (US)
Pages (from-to)	409-425
Number of pages	17
Journal	International Review of Economics and Finance
Volume	29
DOIs	https://doi.org/10.1016/j.iref.2013.07.004
State	Published - Jan 2014

All Science Journal Classification (ASJC) codes

Finance
Economics and Econometrics

Keywords

Agency cost
Capital structure
Controlling shareholder
Manager ownership

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10.1016/j.iref.2013.07.004

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abstract = "Our study investigates how ultimate ownership structure and the corporate tax rate affect the equilibrium trade-off relation between manager ownership and debt in reducing agency costs. Considering the presence of the controlling shareholder, we find that higher corporate tax rates strengthen the trade-off relation between manager ownership and debt while higher control rights held by the controlling shareholder weaken it as well as the strengthening effect of corporate tax rate. Our study contributes to the literature by revealing tax and ultimate ownership structure dimensions and their interactions as additional determinants of corporate capital structure.",

keywords = "Agency cost, Capital structure, Controlling shareholder, Manager ownership",

author = "Lee, {Cheng Few} and Kuo, {Nan Ting}",

note = "Funding Information: We thank the editor and an anonymous reviewer for their helpful comments and suggestions. We acknowledge the financial support from the National Science Council of Taiwan ( NSC 100-2410-H-008-077 ).",

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N2 - Our study investigates how ultimate ownership structure and the corporate tax rate affect the equilibrium trade-off relation between manager ownership and debt in reducing agency costs. Considering the presence of the controlling shareholder, we find that higher corporate tax rates strengthen the trade-off relation between manager ownership and debt while higher control rights held by the controlling shareholder weaken it as well as the strengthening effect of corporate tax rate. Our study contributes to the literature by revealing tax and ultimate ownership structure dimensions and their interactions as additional determinants of corporate capital structure.

AB - Our study investigates how ultimate ownership structure and the corporate tax rate affect the equilibrium trade-off relation between manager ownership and debt in reducing agency costs. Considering the presence of the controlling shareholder, we find that higher corporate tax rates strengthen the trade-off relation between manager ownership and debt while higher control rights held by the controlling shareholder weaken it as well as the strengthening effect of corporate tax rate. Our study contributes to the literature by revealing tax and ultimate ownership structure dimensions and their interactions as additional determinants of corporate capital structure.

KW - Agency cost

KW - Capital structure

KW - Controlling shareholder

KW - Manager ownership

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Effects of ultimate ownership structure and corporate tax on capital structures: Evidence from Taiwan

Abstract

All Science Journal Classification (ASJC) codes

Keywords

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