How Does Removing the Tax Benefits of Debt Affect Firms? Evidence from the 2017 US Tax Reform

• 成果类型: Article; Early Access
• 署名作者: Sanati, Ali; Beyhaghi, Mehdi
• 署名单位: American University; Federal Reserve System - USA; Federal Reserve System Board of Governors
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhaf041
• 发表日期: 2025
• 关键词: capital structure; corporate-debt; INVESTMENT; POLICY; incentives; taxation; cost; OVERHANG; leverage; IMPACT

摘要

The impact of tax benefits of debt on firms remains an open question. The 2017 U.S. tax reform limited the tax advantage of debt for all firms except for small businesses with average sales below $25 million. A regression discontinuity design based on the exception threshold shows that, as tax benefits of debt shrink, corporate debt declines significantly, while equity does not increase sufficiently to offset the reduction. Treated firms also decrease their investments due to the higher cost of capital. Overall, we document a first-order role for tax incentives that affect the cost of capital in shaping corporate policies.