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The impact of tax policy on corporate debt in a developing economy: a study of study of unquoted Indian companies

preprint
posted on 13.05.2009, 09:02 by Christopher Green, Victor Murinde
Taxation has potentially important implications for corporate behaviour. However, there have been few studies of the impact of taxation on companies in developing countries, and fewer still concerned with unquoted companies. In this paper, we study the impact of tax policy on the financial decisions of a sample of unquoted companies in India during the period 1989-99 when tax rates were generally reduced as part of a wider programme of financial liberalization. We examine the impact of the tax regime on company financing decisions, within the context of a model of company leverage, controlling for non-tax influences suggested by the theory of corporate finance. The analysis is carried out using a balanced panel consisting of the published accounts of 97 Indian unquoted companies which reported continuously during 1989-99. The model is estimated using GMM. Estimates of the impact of the 1990s tax reforms are derived, and implications for policy are drawn.

History

School

  • Business and Economics

Department

  • Economics

Publisher

© Loughborough University

Version

VoR (Version of Record)

Publication date

2007

Notes

This working paper is also available at: http://ideas.repec.org/p/lbo/lbowps/2007_25.html

ISSN

1750-4171

Book series

Loughborough University. Department of Economics. Discussion Paper Series; WP 2007-25

Language

en

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