Corporate Income Taxation, Leverage at Entry, and the Growth of Entrepreneurial Companies

Marco Da Rin, M. Di Giacomo, A. Sembenelli

Research output: Working paperDiscussion paperOther research output

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Abstract

We study whether corporate income taxation affects the long-term growth of newly
incorporated companies through its effect on their choice of leverage at entry. We
first document the distribution of initial leverage, which is persistent over several
years. We then find that a decrease in corporate income taxation leads to a sizeable
decrease in leverage at entry. This effect on initial conditions has long-term effects:
an inverted-U relationship exists between leverage at entry and long-term corporate growth, conditional on survival. These effects are economically sizeable, and stronger in countries with better creditor rights and more transparent financial transactions.
Original languageEnglish
Place of PublicationTilburg
PublisherCentER, Center for Economic Research
Number of pages57
Volume2018-055
Publication statusPublished - 21 Dec 2018

Publication series

NameCentER Discussion Paper
Volume2018-055

Fingerprint

Corporate income taxation
Leverage
Long-term growth
Initial conditions
Inverted-U
Corporate growth
Creditor rights

Keywords

  • Corporate income taxation
  • capital structure
  • entrepreneurial finance
  • corporate growth

Cite this

Da Rin, M., Di Giacomo, M., & Sembenelli, A. (2018). Corporate Income Taxation, Leverage at Entry, and the Growth of Entrepreneurial Companies. (CentER Discussion Paper; Vol. 2018-055). Tilburg: CentER, Center for Economic Research.
Da Rin, Marco ; Di Giacomo, M. ; Sembenelli, A. / Corporate Income Taxation, Leverage at Entry, and the Growth of Entrepreneurial Companies. Tilburg : CentER, Center for Economic Research, 2018. (CentER Discussion Paper).
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Da Rin, M, Di Giacomo, M & Sembenelli, A 2018 'Corporate Income Taxation, Leverage at Entry, and the Growth of Entrepreneurial Companies' CentER Discussion Paper, vol. 2018-055, CentER, Center for Economic Research, Tilburg.

Corporate Income Taxation, Leverage at Entry, and the Growth of Entrepreneurial Companies. / Da Rin, Marco; Di Giacomo, M.; Sembenelli, A.

Tilburg : CentER, Center for Economic Research, 2018. (CentER Discussion Paper; Vol. 2018-055).

Research output: Working paperDiscussion paperOther research output

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Da Rin M, Di Giacomo M, Sembenelli A. Corporate Income Taxation, Leverage at Entry, and the Growth of Entrepreneurial Companies. Tilburg: CentER, Center for Economic Research. 2018 Dec 21. (CentER Discussion Paper).