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2. PHD Thesis / Tesis PHD
3. Faculty of Economy and Management / Fakulti Ekonomi dan Pengurusan

Title:	Corporate leverage and debt-bias corporate tax policy in OECD countries: a proposition from Malaysian experience
Authors:	Syed Munawar Shah (P69580)
Supervisor:	Mariani Abd Majid, Assoc. Prof. Dr.
Keywords:	Corporate debt
Issue Date:	3-Jun-2018
Description:	The corporate debt levels in the Organisation for Economic Cooperation and Development (OECD) member countries as agreed by scholars are excessively high and debt levels have turned into a potential threat to financial stability. This accounts for undertaking the present research. It aims to address the issue of high corporate debt levels in the OECD countries and a proposition from Malaysian experience in three essays. The first essay qualitatively examines the effect of the existing corporate tax system on the corporate debt level in OECD countries. The essay then explores corporate threshold for debt and equity for 33 Malaysian industries that contain 1053 corporations. The corporate policy in Malaysia is working well by inducing corporations towards equity, which is beneficial for the financial stability. The second essay initially explores the tax savings that corporations make in the debt-bias tax system by holding excessive debt. The essay then empirically examines the effect of corporate debt levels on the economic growth in OECD countries. After controlling for various factors using pooled mean group estimation (PMG) on the (OECD) countries as the sample, the findings show that increase in debt levels of financial corporations, non-financial corporations, and banks slower economic growth significantly. The third essay assesses the combined policy of ACE-CBIT as proposed in the literature for the OECD countries in reducing the debt in corporations and improving the welfare. This research uses a mathematical model to observe the effects of policy change on debt financing choice by corporation given constant government tax revenue. For the equations, the thesis mathematically formulates the government tax revenues based on the existing debt-bias corporate tax regulations and formulates the corporate financing choice based on the decision weight probability in the prospect theory. The results reveal that the ACE-CBIT combined policy reduces the debt level in corporations. However, the economic welfare is suboptimal because the revenue collected through CBIT used to subsidize equity in the form of ACE is limited. It is suggested that the government make corporations pay tax on the interest due to debt financing. A gradual reformed policy is suggested. First, a policy of ACE in a combination of a policy of a tax on the interest rate (FIT) can be introduced to discourage corporation from choosing debt. The results reveal that the ACE - FIT policy reduces debt levels and improve economic welfare for a given government tax revenue. The OECD countries might implement the Malaysian corporate policy, which is equity-biased. The policy is assessed and the results show that not only the debt level eliminates but also the welfares is superior as compared to other mentioned policies including ACE-CBIT and ACE-FIT.,Certification on Master's/Doctoral Thesis" is not available
Pages:	203
Call Number:	HG4028.D3S974 2018 tesis
Publisher:	UKM, Bangi
Appears in Collections:	Faculty of Economy and Management / Fakulti Ekonomi dan Pengurusan

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