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In the evolving landscape of global finance, the transparency of corporate tax practices has become increasingly important. Stakeholders, such as creditors, investors and regulators, want more transparency in the way companies handle and disclose their tax obligations. This master thesis investigates a critical aspect of this dynamic: how the transparency of tax risks influences the financing options available to corporations from creditors. This thesis attempts to find an answer by analysing the hypothesis of whether greater transparency in the disclosure of tax information is associated with a higher probability of obtaining a bank loan.After providing a theoretical explanation, I have included a detailed quantitative analysis to evaluate the hypotheses formed by the literature review. Utilising two regression models with distinct dependent variables, this analysis examines the direct and indirect effects of tax risk transparency on the willingness of creditors to provide financing. Overall, the findings suggest that while greater transparency in tax risks may increase a company's credibility and reduce perceived risk, it does not necessarily result in easier access to bank loans or more favourable financing terms. Instead, transparent companies may pursue more conservative financial strategies, reducing their reliance on debt. This understanding of the relationship between tax transparency and financing underscores the importance of considering multiple factors in corporate financial decision-making. The study's limitations, which include its dependence on information from the Bel-first database and its omission of variables that may have been important, indicate room for future research.

Tax Transparency, Creditor Financing, Leverage, Debt Maturity, Bank Loans, Regression Analysis, Belgian Firms --- Droit, criminologie & sciences politiques > Droit fiscal

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This paper examines how the ability to access long-term debt affects firm-level growth volatility. The analysis finds that firms in industries with stronger preference to use long-term finance relative to short-term finance experience lower growth volatility in countries with better-developed financial systems, as these firms may benefit from reduced refinancing risk. Institutions that facilitate the availability of credit information and contract enforcement mitigate the refinancing risk and therefore growth volatility associated with short-term financing. Increased availability of long-term finance reduces growth volatility in crisis as well as non-crisis periods.

Access To Finance --- Bankruptcy and Resolution of Financial Distress --- Banks and Banking Reform --- Debt Markets --- Debt Maturity --- Emerging Markets --- Financial Dependence --- Financial Development --- Firm Volatility

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This paper provides new theoretical and empirical evidence suggesting that the quality of credit information may be a key element in explaining the maturity structure of corporate debt around the world. In markets with poor credit information and hence a high degree of uncertainty about borrower quality, the authors find suboptimal equilibria in which short-term contracts are preferred either as a hedge against uncertainty to limit losses in bad states (in the symmetric information case) or as a screening device to learn about borrower credit quality in the course of a repeated lending relationship (in the asymmetric information case). The results of the model are supported by the econometric analysis of panel data from both industrial and developing economies. The authors find that countries with better quality of credit information (for example, as a result of improvements in credit reporting systems or accounting standards) are characterized by a higher share of long-term debt as a proportion of total corporate debt ceteris paribus. The findings suggest that promoting institutions and policies to improve the quality of credit information is an important prerequisite for increasing access of firms to long-term finance.

Access to Finance --- Bankruptcy and Resolution of Financial Distress --- Banks and Banking Reform --- Bond --- Bond markets --- Corporate Debt --- Credit Information --- Debt Markets --- Debt Maturity --- Finance and Financial Sector Development --- Financial Intermediation --- Illiquidity --- International Finance --- Long-term loan --- Maturities --- Short-term borrowing

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April 2000 - Debt-equity ratios do not tend to increase after financial liberalization, but there is a shift from long-term to short-term debt. Globalization has uneven effects for firms with and without access to international capital markets. Countries with deeper domestic financial markets are less affected by financial liberalization. Schmukler and Vesperoni investigate whether integration with global markets affects the financing choices of firms from East Asia and Latin America. Using firm-level data for the 1980s and 1990s, they study how leverage ratios, the structure of debt maturity, and sources of financing change when economies are liberalized and when firms gain access to international equity and bond markets. The evidence shows that integration with world financial markets has uneven effects. On the one hand, debt maturity for the average firm shortens when countries undertake financial liberalization. On the other hand, domestic firms that actually participate in international markets get better financing opportunities and extend their debt maturity. Moreover, firms in economies with deeper domestic financial systems are affected less by financial liberalization. Finally, they show that leverage ratios increase during times of crisis. In an appendix, they analyze the previously unstudied case of Argentina, which experienced sharp financial liberalization and was hit hard by all recent global crises. This paper - a product of Macroeconomics and Growth, Development Reseach Group - is part of a larger effort in the group to understand financial development and financial integration. The authors may be contacted at sschmukler@worldbank.org or vesperon@wam.umd.edu.

Banks and Banking Reform --- Bond --- Bond Markets --- Debt --- Debt Markets --- Debt Maturity --- Debt-Equity --- Economic Development --- Emerging Economies --- Emerging Markets --- Equity --- Finance and Financial Sector Development --- Financial Liberalization --- Financial Markets --- Financial Structure --- Financial Systems --- Globalization --- International Bond --- International Financial Markets --- International Markets --- Maturity Structure --- Private Sector Development --- Share --- World Financial Markets

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January 2000 - Corporate financing patterns around the world reflect countries' institutional environments. Weaknesses in the corporate sector have increasingly been cited as important factors in financial crises in both emerging markets and industrial countries. Analysts have pointed to weak corporate performance and risky financing patterns as major causes of the East Asian financial crisis. And some have argued that company balance sheet problems may also have played a role, independent of macroeconomic or other weaknesses, including poor corporate sector performance. But little is known about the empirical importance of firm financing choices in predicting and explaining financial instability. Firm financing patterns have long been studied by the corporate finance literature. Financing patterns have traditionally been analyzed in the Modigliani-Miller framework, expanded to incorporate taxes and bankruptcy costs. More recently, asymmetric information issues have drawn attention to agency costs and their impact on firm financing choices. There is also an important literature relating financing patterns to firm performance and governance. Several recent studies have focused on identifying systematic cross-country differences in firm financing patterns - and the effects of these differences on financial sector development and economic growth. They have also examined the causes of different financing patterns, particularly countries' legal and institutional environments. The literature has devoted little attention to corporate sector risk characteristics, however, aside from leverage and debt maturity considerations. Even these measures have been the subject of few empirical investigations, mainly because of a paucity of data on corporate sectors around the world. Building on data that have recently become available, Claessens, Djankov, and Nenova try to fill this gap in the literature and shed light on the risk characteristics of corporate sectors around the world. They investigate how corporate sectors' financial and operating structures relate to the institutional environment in which they operate, using data for more than 11,000 firms in 46 countries. They show that: The origins of a country's laws, the strength of its equity and creditor rights, and the nature of its financial system can account for the degree of corporate risk-taking; In particular, corporations in common law countries and market-based financial systems have less risky financing patterns; Stronger protection of equity and creditor rights is also associated with less financial risk. This paper - a product of the Financial Sector Strategy and Policy Group, Financial Sector Vice Presidency - is part of a larger effort in the Bank to study the determinants of the riskiness of countries' corporate and financial systems.

Accounting --- Asymmetric Information --- Bankruptcy --- Banks and Banking Reform --- Common Law --- Debt --- Debt Markets --- Debt Maturity --- Economic Theory and Research --- Emerging Markets --- Finance --- Finance and Financial Sector Development --- Financial Instability --- Financial Literacy --- Financial Markets --- Financial Risk --- Financial Risks --- Financial Sector Development --- Financial Structure --- Financial Systems --- Firm Performance --- Labor Policies --- Macroeconomics and Economic Growth --- Private Sector Development --- Property --- Property Rights --- Social Protections and Labor --- Tax --- Taxes --- Valuation