Determinants of capital structure
: impact of the net financing expenses regime in Portugal

  • Miguel Puim (Student)

Student thesis: Master's Thesis


In Portugal, from 2013 onwards, a quantitative limitation applies to the amount of net financing expenses that can be deducted on the tax basis of the Corporate Income Tax, specifically, the higher between €1 M and 30% of an adjusted EBITDA. During the period in analysis, this regime precluded the deduction of financing expenses of €1,268.7 M per year.The purpose of this dissertation is to assess if, and to which extent, the net financing expenses regime promoted a change on the capital structure of Portuguese companies, notably an increase of equity financing in lieu of debt financing.Under a difference-in-differences regression, it was concluded that, upon enactment of the net financing expenses regime, the entities impacted by the regime (“treatment group”) decreased its financial leverage and total leverage, respectively, in 4.4 and 5.9 percentage points more than the entities not impacted (“control group”). In terms of magnitude, these figures correspond, respectively, to 8.6% and 8.2% of the average financial leverage and total leverage of the treatment group prior to the regime.Moreover, the treatment group reduced its leverage with successive more intensity, pattern, hypothetically, caused by initial constraints to adjust the capital structure or by the possibility to carryforward excessive financing expenses during 5 years.
Date of Award24 Jan 2022
Original languageEnglish
Awarding Institution
  • Universidade Católica Portuguesa
SupervisorDiana Bonfim (Supervisor)


  • Capital structure
  • Leverage
  • Net financing expenses
  • Interest limitation rule
  • Interest barrier rules
  • Corporate Income Tax (CIT)


  • Mestrado em Finanças

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