Tax benefit and bankruptcy cost of debt

Ricca, Leandro Telles; Jucá, Michele Nascimento; Hadad, Eli

doi:10.1016/j.qref.2021.05.003

Cited by 5 publications

(4 citation statements)

References 32 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Creditors believe that managers in companies with high debt can still perform well. Under the current tax regulation framework, companies can benefit from higher debt if they deduct interest expenses from their taxable income, resulting in tax savings (Ricca et al, 2021). These tax savings may improve the companies' cash flow and help them meet their contractual obligation to creditors.…”

Section: Discussionmentioning

confidence: 99%

Accrual Earnings Management, Real Earnings Management, and Cost of Debt: Does Capital Structure Matter?

Firmansyah,

Prakosa,

Al ‘Alam

et al. 2024

JRAK

View full text Add to dashboard Cite

This study looks at how accrual and real earnings management affect the cost of debt. This study also considers capital structure as a moderating variable. This quantitative study draws on data from the financial statements of manufacturing businesses listed on the IDX from 2016 to 2020. The research data was gathered from www.idnfinancial.com. Purposive sampling is employed in this study, with a sample size of 565 observations. Multiple linear regression analysis was employed to evaluate hypotheses with panel data. According to this study, accrual earnings management is unrelated to the cost of debt. Meanwhile, real earnings management correlates favorably with the cost of debt. The moderating influence of capital structure is often missing or minor in the link between real earnings management and the cost of debt. This research enriches the knowledge discussing the hazards of earnings management performed by managers in organizations with specific debt levels.

show abstract

Section: Discussionmentioning

confidence: 99%

Accrual Earnings Management, Real Earnings Management, and Cost of Debt: Does Capital Structure Matter?

Firmansyah,

Prakosa,

Al ‘Alam

et al. 2024

JRAK

View full text Add to dashboard Cite

show abstract

“…(2021) examine how bank taxation affects corporate financing and show that taxing banks' gross profits lead to higher bank leverage and results in lower risk and credit supply. Ricca et al. (2021) find that increased leverage results from higher debt tax benefits than ex ante bankruptcy costs, and companies do not optimize debt tax benefits owing to factors other than debt.…”

Section: Literature Review Theoretical Framework and Hypotheses Devel...mentioning

confidence: 97%

“…Sobiech et al (2021) examine how bank taxation affects corporate financing and show that taxing banks' gross profits lead to higher bank leverage and results in lower risk and credit supply. Ricca et al (2021) find that increased leverage results from higher debt tax benefits than ex ante bankruptcy costs, and companies do not optimize debt tax benefits owing to factors other than debt. Deng et al (2020) find evidence supporting the dynamic tradeoff theory, namely, that firms are unresponsive to tax cuts but increase long-term leverage when taxes rise.…”

Section: Introductionmentioning

confidence: 97%

Tax enforcement: incentive or inhibition? Evidence from debt aggressiveness and capital structure in China

Liu

Yao

AlHares

et al. 2022

APJBA

View full text Add to dashboard Cite

PurposeTo investigate the impact of tax enforcement on (a) debt aggressiveness (DEA) and (b) dynamic adjustment of capital structure in Chinese listed firms.Design/methodology/approachThe authors estimate the target capital structure by employing the different models. This study uses data of Chinese A-share listed firms from year 1998 to 2015.FindingsThe study suggests that the greater the intensity of tax enforcement, the more radical the listed companies' debt policy. The macroeconomic status and nature of property rights have significant moderating effect on the positive relationship between tax enforcement and DEA of listed companies. Further, tax enforcement has a significant impact on the dynamic adjustment of capital structure.Practical implicationsResearch conclusions are conducive to tax administration departments to understand the economic consequences of tax enforcement and further promote tax administration efficiency. Additionally, listed companies can rationally adjust their capital structure to strengthen tax enforcement.Originality/valueThis research helps extend the influencing factors of corporate debt decision-making and capital structure dynamic adjustment to the level of tax enforcement and provide new evidence on the effects of tax enforcement on corporate capital structure.

show abstract

“…In the short term, loose monetary policy may increase the profits of financial institutions (White, 2012). According to the analysis of trade-off theory, financial institutions benefit from tax shield advantages in a way of faster decline in debt financing costs compared to their interest income, thereby increasing the net interest rate (Ricca et al, 2021). The increase in debt financing also leads to higher leverage.…”

Section: Introductionmentioning

confidence: 99%

Monetary Policy and Deleveraging of Microfinance Institutions in China: A Dynamic Threshold Approach

Li,

Mohd Ashhari,

Hisyam Ab Razak

et al. 2024

IJARBSS

View full text Add to dashboard Cite

By constructing the dynamic panel model and dynamic threshold model, this paper empirically analyzes the direct impact of monetary policy transmission on deleveraging initiatives of 204 microfinance institutions (MFIs) in China from 2012 to 2021, and the interactive effects of different monetary policy tools. The empirical investigations find that: the quantitative monetary policy transmission directs a negative impact on MFIs' deleveraging, while the direct macro-control of price-based monetary policy tool is not significant. When two monetary policy tools interact, the inhibitory effect of quantitative monetary policy on MFIs' deleveraging weakens once the price-based monetary policy tightening exceeds the threshold. Additionally, as the endogenous money multiplier amplifies the actual money quantity, price-based monetary policy starts to play its role in stable controllability, and MFIs gradually accept market-oriented interest rate mechanisms to adjust their deleveraging initiatives. The findings herein contribute to the significant implications of the study. The central bank should characterize the quantity control of quantitative monetary policy and the structural control of price-based monetary policy to formulate a scientific monetary policy. By improving the market-oriented interest rate mechanism of microfinance and coordinating with macroprudential regulations, it could achieve micro-prudential guidance on MFIs' deleveraging progress, as well accelerate economic transition and structural leverage adjustment.

show abstract

Tax benefit and bankruptcy cost of debt

Cited by 5 publications

References 32 publications

Accrual Earnings Management, Real Earnings Management, and Cost of Debt: Does Capital Structure Matter?

Accrual Earnings Management, Real Earnings Management, and Cost of Debt: Does Capital Structure Matter?

Tax enforcement: incentive or inhibition? Evidence from debt aggressiveness and capital structure in China

Monetary Policy and Deleveraging of Microfinance Institutions in China: A Dynamic Threshold Approach

Contact Info

Product

Resources

About