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The Effect of Risk and Tax Differences on Corporate and Limited Partnership Capital Structure

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  • Omer, Thomas C.
  • Terando, William D.

Abstract

This paper extends our understanding of capital structure differences across organizational form. We build on existing capital structure literature concerning partnership debt use and suggest that high business risk, in combination with general partner (GP) unlimited liability, explains cross-sectional differences in corporate and limited partnership (LP) debt levels. We find that when considered concomitantly with the tax explanation, the risk explanation is a significant factor explaining capital structure differences between LPs and corporations. Our contribution to the literature is demonstrating the combined effect of business risk and GP unlimited liability on an LP’s capital structure across multiple industry groups.

Suggested Citation

  • Omer, Thomas C. & Terando, William D., 1999. "The Effect of Risk and Tax Differences on Corporate and Limited Partnership Capital Structure," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(4), pages 699-716, December.
    • Handle: RePEc:ntj:journl:v:52:y:1999:i:4:p:699-716
    DOI: 10.1086/NTJ41789425
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    References listed on IDEAS

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    1. Ang, James S & Chua, Jess H & McConnell, John J, 1982. "The Administrative Costs of Corporate Bankruptcy: A Note," Journal of Finance, American Finance Association, vol. 37(1), pages 219-226, March.
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    Cited by:

    1. Hanlon, Michelle & Heitzman, Shane, 2010. "A review of tax research," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 127-178, December.
    2. Chen, Haiwei & Ngo, Thanh, 2018. "Master limited partnerships: Is it a smart investment vehicle?," Journal of Commodity Markets, Elsevier, vol. 11(C), pages 22-36.
    3. Barclay, Michael J. & Heitzman, Shane M. & Smith, Clifford W., 2013. "Debt and taxes: Evidence from the real estate industry," Journal of Corporate Finance, Elsevier, vol. 20(C), pages 74-93.

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