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on Corporate Finance |
| By: | Mara Faccio; Stefano Manfredonia |
| Abstract: | We use establishment-level data to examine the relation between corporate taxes and financial distress. Using a border discontinuity design, we document that higher corporate income tax rates significantly increase financial distress, particularly for geographically concentrated firms, with sizable spillovers across establishments. We further investigate how taxes affect establishment-level financial distress by exploiting the interest limitation rule introduced by the 2017 Tax Cuts and Jobs Act. Using a difference-in-differences design, we find that affected firms experience a decline in financial distress. This occurs because the reduced tax advantage of debt induces firms to deleverage, reducing financial distress through capital structure adjustments. |
| JEL: | G3 G32 G38 H25 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35134 |
| By: | Erdinc Akyildirim; Gonul Colak; Giray Gozgor; Thang Ho |
| Abstract: | This paper constructs a novel firm-level measure of geopolitical risk using textual analysis of 130, 061 earnings conference call transcripts and examines its impact on firms' reliance on bank-based financing. Using a panel of 4, 692 listed firms across 38 countries over 2005–2024, we find that higher firm-level geopolitical risk is associated with a significant increase in the bank debt ratio. Instrument-level analysis shows that this effect is driven by greater reliance on term loans, while revolving credit facilities exhibit no systematic response. The relationship holds across United States and non-United States firms, as well as across developed and emerging economies, with stronger effects in emerging markets and in institutional environments that facilitate contracting and enforcement. A comprehensive set of robustness tests confirms that the results are not driven by industry composition, regional concentration, crisis periods, or omitted institutional factors. Difference-in-differences evidence around the Russia–Ukraine war provides additional support, showing that firms with higher pre-war geopolitical risk increase their reliance on bank debt after 2022. Overall, the findings identify geopolitical risk as a time-varying determinant of corporate financing decisions. |
| Keywords: | geopolitical risk, bank debt, term loans, capital structure, institutional environment, difference-in-differences |
| JEL: | G32 G21 F34 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12624 |
| By: | M. Tedde |
| Abstract: | Women are less financially literate than men and participate less to stock market. However, using a unique brokerage dataset and controlling for different levels of financial literacy, we find that women achieve lower scores in the MiFID questionnaire not because of lack of knowledge but because of lack of confidence in their knowledge. Nonetheless, female participation in stock market is still lower than male investors. |
| Keywords: | financial literacy;Confidence;MiFID Directive;gender gap;Stock market participation |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:cns:cnscwp:202603 |
| By: | Hang T.T. Nguyen (Otto-von-Guericke University Magdeburg) |
| Abstract: | This paper investigates the relationship between corporate income tax rates (CITR) and firm-level productivity growth using AMADEUS data of 304, 410 observations from 79, 842 European firms from 2006 to 2019. The results imply a robust non-linear relationship: higher CITRs are positively associated with productivity growth for high-productivity firms near the technological frontier and negatively associated with the productivity catch-up of less productive firms. Heterogeneity tests suggest a stronger productivity response to tax rate changes of small and medium-sized enterprises (SMEs) and domestic firms, while I do not find a significant productivity response to tax rate changes for large and multinational firms. The main findings are robust across various productivity estimation methods and model specifications and challenge the conventional view that higher business tax rates have a linear and negative effect on productivity growth. The paper contributes to the ongoing debate about the role of corporate taxation in shaping economic competitiveness and long-term growth. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:mag:wpaper:26006 |
| By: | Felix Ward (Erasmus University Rotterdam); Casper de Vries (Erasmus University Rotterdam) |
| Abstract: | Does the preferential tax treatment of debt over equity cause banks to increase their leverage? We construct a novel dataset tracing the evolution of the debt tax shield for banks in advanced economies from 1870 to 2020. Exploiting variation from nearly all changes in banking-sector tax shields since the nineteenth century, we show that a 1 percentage point increase in the tax shield reduces bank capital ratios by 0.25-0.8 percentage points. Our estimates suggest that the tax advantage of debt was an important driver of the rise in bank leverage during the twentieth century. |
| Keywords: | corporate income taxation, debt bias, interest deductibility, financial stability |
| JEL: | E44 G21 G32 |
| Date: | 2026–04–02 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20260016 |
| By: | Laura Baselga-Pascual; Lidia Loban; Emma-Riikka Myllymäki (Audencia Business School) |
| Abstract: | This study investigates the relationship between credit risk and bank exposure to sovereign debt. Using an international dataset of commercial banks from 2002 to 2022, we apply various regressions and panel data models to address potential endogeneity issues. Our results reveal that banks with higher levels of impaired loans tend to hold more sovereign debt. Furthermore, we observe that this relationship is stronger in countries with high sovereign credit ratings. This suggests that banks, when confronted with elevated credit risk from impaired loans, may seek safety in sovereign debt as a seemingly secure investment. |
| Keywords: | Financial institutions, Bank risk, Sovereign debt nexus, Credit risk |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05585256 |
| By: | BEN CHEIKH, Nidhaleddine (ESSCA School of Management); Rault, Christophe (University of Orléans) |
| Abstract: | Using a sample of 67 countries, this paper examines how financial inclusion shapes the transition to inclusive and sustainable growth. First, we analyze the heterogeneous and asymmetric effects of key determinants using panel quantile regression. The results show that financial inclusion, institutional quality, and ICT diffusion significantly affect inclusiveness only in the lower tail of the distribution. While financial inclusion and ICT diffusion appear detrimental, institutional quality promotes shared prosperity. Second, we explore a mediating effect using a non-linear panel threshold model. The findings highlight the role of financial inclusion in enhancing inclusive growth. Although ICT infrastructure negatively affects inclusiveness at low levels of financial inclusion, this relationship becomes positive beyond a certain threshold. These results suggest that policymakers should combine financial inclusion, governance quality, and ICT development to foster inclusive growth. |
| Keywords: | inclusive growth, financial inclusion, non-linear panel data modelling |
| JEL: | C23 O11 O16 O43 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18582 |
| By: | Philippe Demougin; Áron Kiss; Alexander Leodolter; Kristine Van Herck |
| Abstract: | This brief discusses how reforms in Member States related to taxation, in particular business taxation, can contribute to spurring investment, while respecting the need to maintain public revenue in a context of high debt and significant fiscal needs. After describing how corporate taxation contributes to the public finances of EU countries, the brief surveys recent studies analysing the impact of corporate taxation on business investment. Recent studies suggest that cuts to statutory tax rates represent a costly way of spurring investment. Targeted incentives for investment, including investment tax credits and accelerated depreciation rules, may be a more cost-effective way to spur investment, although their stimulative effects are not sufficient to counterbalance the static fiscal costs. Business taxation based on tax bases other than profits (e.g. on real estate or turnover) has also been found to be more distortive and harmful to investment than profit-based taxes. Specific aspects of the tax code may open the way for aggressive tax planning (ATP) whereby taxpayers reduce their corporate tax liability through arrangements that may be legal but are in contradiction with the intent of the law. Through the European Semester and reforms in national Recovery and Resilience Plans, the EU has achieved some success in fighting ATP in a number of countries, although some issues remain. |
| Keywords: | Business taxation, corporate income tax, investment, EU, Draghi report, aggressive tax planning, European Semester. |
| JEL: | H25 H26 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:euf:ecobri:089 |
| By: | George Cui; Xiaosheng Guo; Leticia Juarez |
| Abstract: | This paper examines the impact of trade credit and bank loans on firms’ exchange rate passthrough. Using a comprehensive dataset combining customs transaction records and balance sheet data for Chinese exporters during 2000–2011, we document that firms that more intensively extend trade credit to their buyers exhibit more complete exchange rate pass-through. Further empirical investigation sheds light on the underlying mechanism. First, the use of trade credit is positively correlated with exporters’ dependence on bank loans. Second, firm-level bank loan interest rates decline following home currency depreciation. Motivated by these findings, we develop a theoretical model in which exporters constrained by working capital simultaneously extend trade credit to buyers and rely on bank borrowing. The model shows that home currency depreciation improves exporters’ profitability, lowers default risk, and reduces borrowing costs, ultimately enhancing exchange rate pass-through. By endogenizing the interest rate through firm-level default risk, the model reveals a novel channel through which firms’ financial activities shape the dynamics of exchange rate pass-through. |
| Keywords: | Exchange rate pass-through; Trade credit; Financial constraints |
| Date: | 2026–04–24 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/084 |