Eskandari, Ruhollah (Omid) orcid.org/0000-0002-3976-7132 and Zamanian, Morteza (2023) Heterogeneous Responses to Corporate Marginal Tax Rates:Evidence from Small and Large Firms. Journal of Applied Econometrics. ISSN 0883-7252
Abstract
Do small and large firms respond differently to tax cuts? Using new narrative measures of the exogenous variation in corporate marginal tax rates and a unique dataset of U.S. manufacturing firms, we find that the investment of large firms is more sensitive to a marginal tax cut than that of small firms. Furthermore, we show that small firms finance their new investments almost entirely through debt, whereas large firms use both cash and debt. Following a tax cut, the tax advantage of debt financing falls relative to cash financing. This substitution effect is more pronounced for large firms and induces them to rely on cash financing to a larger extent than small firms.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2023 The Authors |
Dates: |
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Institution: | The University of York |
Academic Units: | The University of York > Faculty of Social Sciences (York) > Economics and Related Studies (York) |
Depositing User: | Pure (York) |
Date Deposited: | 23 Aug 2023 08:10 |
Last Modified: | 06 Nov 2024 01:52 |
Published Version: | https://doi.org/10.1002/jae.3000 |
Status: | Published online |
Refereed: | Yes |
Identification Number: | 10.1002/jae.3000 |
Related URLs: | |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:202618 |
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