Using a sample of highly (over-)leveraged Austrian ski hotels undergoing debt restructurings, we show that reducing a debt overhang leads to a significant improvement in operating performance (return on assets, net profit margin). In particular, a reduction in leverage leads to a decrease in overhead costs, wages, and input costs, and to an increase in sales. Changes in leverage in the debt restructurings are instrumented with Unexpected Snow, which captures the extent to which a ski hotel experienced unusually good or bad snow conditions prior to the debt restructuring. Effectively, Unexpected Snow provides lending banks with the counterfactual of what would have been the ski hotel's operating performance in the absence of strategic default, thus allowing to distinguish between ski hotels that are in distress due to negative demand shocks ("liquidity defaulters") and ski hotels that are in distress due to debt overhang ("strategic defaulters").

This paper examines the IPO pricing processes of two different markets, each of which employs bookbuilding methods for marketing the IPO shares. For each market we investigate two questions: Does bookbuilding serve mainly as a method for distributing shares, or also as a means for gathering information? And, to what extent do underwriters respond in IPO pricing to any information that they obtain through bookbuilding? We find that a direct comparison of these two markets sheds light on the bookbuilding process in each. For Nasdaq IPOs we find evidence consistent with informational rents being earned by investors for providing information during bookbuilding. On the Neuer Markt there is no such evidence. Instead, we find evidence consistent with rents being paid for information that helps underwriters to set indicative price ranges prior to bookbuilding. The two markets differ further in how underwriters respond to information in pricing IPOs. For the Neuer Markt, this response is severly constrained since underwriters do not set prices above the price ranges. We estimate the total cost of this "restriction" to be approximately one billion Euros for our sample of IPOs. While there are no such apparent restrictions for Nasdaq, we show that also on this market IPO prices are "sticky" in that underwriters respond less to information received later in the pricing process. / Series: Working Papers SFB "Adaptive Information Systems and Modelling in Economics and Management Science"

We contribute to the empirical literature on the debt bias of corporate income taxation through a firm-level evaluation of the European Commission's recent proposal of an Allowance for Growth and Investment (AGI). We use the introduction, the application and the repeal of a similar allowance in Austria during the early 2000s to evaluate the effects of the AGI on corporate equity and profit distribution. Our analysis provides evidence that such an allowance could increase corporate equity ratios by 5.5 percentage points and reduce profit distributions by 7.6 percentage points. These effects are stronger than those the previous literature for traditional Allowance for Corporate Equity (ACE) tax systems has identified. Additionally, we contribute to the recently expanding literature on the influence of ownership on tax planning as we find significant differences in the utilization of the AGI depending on individual specifics of the majority shareholder as well as depending on the number of shareholders of the respective firms. / Series: WU International Taxation Research Paper Series

In intra-group finance hybrid instruments allow for tailor-made form of finance. Hence hybrid finance is often used for international tax planning in multinational groups. Due to a lack of international tax harmonization or tax coordination qualification conflict can arise. A specific hybrid instrument is classified as debt in one country, and as equity in the other country. This may lead to double taxation. In the reverse case, double non-taxation can arise. Against this legal background one might expect that cross-border hybrid intra-group finance is advantageous in comparison to classical debt finance in case of double-non-taxation while it can be expected to be disadvantageous in the case of double taxation of the yield. Previous studies do not include qualification conflicts. Thus the question arises how qualification conflicts are affecting an intra-group finance decision. We examine effects of such qualification conflicts, resulting from the use of cross-border, intra-group hybrid finance, on the tax-advantageousness as compared to classical debt finance. The analysis is based on a binomial simulation model including economic and legal uncertainty. We show that the results of our analysis under uncertainty vary significantly when compared to the more obvious results under economic and legal certainty. (author´s abstract) / Series: Discussion Papers SFB International Tax Coordination