Corporate income tax rate, ownership and optimization of debt structure

This paper investigates the effects of corporate tax on debt structure of China listed companies, and its differences between state-owned companies and non-state-owned companies. We find that the proportion of interest-bearing debt to total liabilities is positive related to corporate income tax rate in state-owned companies, but not in non-state-owned companies; the maturity of interest-bearing debt is positive related to corporate income tax rate, and this relationship in non-state-owned companies is more pronounced than in state-owned companies. These evidences shows that companies have adjusted theirs debt structures to adapt to corporate income tax rate, and there are some differences between state-owned companies and non-state-owned companies in debt restructuring behaviors because they face very different financing environment. This paper contributes to the researches on the relationship between tax and capital structure, and helps us to understand financial behaviors of state-owned companies and non-state-owned companies.