Other control variables include size, growth, profitability, tangibility, age, earnings variability, debt service capacity, dividend payout ratio, non-debt tax shields
, degree of operating leverage, price-earnings ratio, promoter shareholdings, tax rate and uniqueness.
Capital structure determinants are except tax shields
, profitability, size, assets tangibility, growth, signaling and cost of financial distress.
The empirical studies from US firms, such as that of Harris and Raviv , seem to suggest that "leverage increases with fixed assets, non-debt tax shields
, investment opportunities and firm size and decreases with volatility, advertising expenditure, the probability of bankruptcy, profitability and uniqueness of the product.
DeAngelo and Masulis (1980) explain that non-debt tax shields
work as a substitute for the tax benefits for debts.
The Honduran Congress approved a new mining law which eliminates tax shields
for mining companies, reports Laprensa.
The novelty of the approach consisted in emphasising the role of the tax shields
arising from debt financing.
Alexander Groh and Christoph Henseleit, from Barcelona and Munich, wrote The Valuation of Tax Shields
Induced by Asset Step-ups in Corporate Acquisitions.
Analyzing the data, author has found that past profitability, non-debt tax shields
and firm size are the strongest determinants of capital structure both in the short as well as long term.
We identify, the assumption that justifies the textbook approach of discounting interest tax shields
at the cost of debt.
The value of tax shields
depends on the debt policy of the company.
They have theoretically and empirically identified agency costs, information asymmetry, taxes, non-debt tax shields
, growth, firm size, assets' collateral value and tangibility, profitability and liquidity, earnings variability, expected costs of financial distress, industry classification, country factor, and firm's international activities as the determinants of firm's debt-equity choices.
ISS Canada ignores that Bolivar has very significant tax shields
going forward, which significantly depresses its valuation calculation.