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Jan Bartholdy

Debt and Taxes: Evidence from bank-financed unlisted firms

Research output: Working paperResearch


  • F 2006 02

    Final published version, 695 KB, PDF document

This paper analyzes the capital structure decision of non-listed bank-financed firms using a rich and unique new data set of Portuguese firms. These firms are rarely studied in capital structure contexts and differ from large listed firms in terms of agency and asymmetric information problems and funding sources. It is argued that the solution of agency and asymmetric information problems for large firms shows up on the balance sheet (as restrictions on debt) whereas for small firms these problems are solved by financial institutions and are therefore less apparent on the balance sheet. This makes it easier for small firms to exploit tax advantages of debt. The empirical analysis shows that debt tax shields and provisions for tax loss carry-forwards have an important impact on the capital structure of small firms. It is also found that the balance sheet variables used for large listed firms in different countries to model agency costs and asymmetric information do not work well for small non-listed firms. The only significant variables (besides tax variables) for small firms are bankruptcy (collateral) variables.
Original languageEnglish
Place of publicationAarhus
PublisherAarhus School of Business, Department of Business Studies
ISBN (Electronic)8778821258
Publication statusPublished - 2006

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