High corporate taxes incentivize corporate debt

Multinational American companies with significant operations in countries with low corporate taxes take on less debt than companies that face higher taxes, according to a new study from the University of Maryland's Robert H. Smith School of Business. The finding helps to solve an academic mystery: A link between higher corporate taxes and debt levels is predicted by economic theory, but some recent studies have either failed to find such a connection or found it to be weaker than expected.