We study whether corporate income taxation affects the long-term growth of newly incorporated companies through its effect on their choice of leverage at entry. We find that a decrease in corporate income taxation leads to a sizeable decrease in leverage at entry, and that the distribution of...

Can tax policy foster the creation of new companies? To answer this question, we assemble a novel country-industry level panel database with data on entry (by incorporation) for 17 European countries between 1997 and 2004. Our analysis is based on recent models of how corporate taxation affects...

The use of debt for financing new companies comes with screening and monitoring by lenders that help focusing on achieving long-term growth. Debt-induced governance further brings entrepreneurs to pursue growth opportunities. By contrast, as more debt is used and leverage increases,...