Enterprise Income Tax On The Capital Structure Of Listed Companies

Capital structure is one of the most important issues in corporate finance. Theories indicate that corporate tax is an important factor which affects capital structure. In theory, the higher the corporate tax is, the company intend to use more debt. But in empirical research, the conclusions of research on the connection of corporate tax and capital structure are quite ambiguous. This dissertation makes an empirical research on the connection of corporate tax and capital structure of the listed companies in China.This paper investigates the effect of corporate tax on capital structure, using total debt ratio and change of long-term debt/total capital ratio separately as the dependent variables, MTR and MTRt-1 (marginal tax rate) separately as the explanatoryvariables after controlling other variables which have effect on capital structure. The result indicates that corporate tax has effect on capital structure. Higher the MTR is, the company has intention to use more debt. For control variables, the results indicate that different industries have different capital structures, size of the company is positively related to total debt ratio, return on asset is negatively related to total debt ratio, growth of the company has no distinct relation to total debt ratio, probability of bankruptcy has no distinct relation to total debt ratio, nondebt tax shield is negatively related to total debt ratio, fixed asset/total asset ratio, inventory/total asset ratio and intangible asset/total asset ratio are positively related to total debt ratio. The research indicates that the explanation power of MTR to capital structure is 0.9% and the explanation power of all the available variables to capital structure is 21.3%.