How big are the tax benefits of debt?
Article Abstract:
A theory is presented demonstrating that capitalized tax benefits produced by debt equal 9.7% of a corporation's value. Research indicates that conservative debt policy is most common among large, profitable, liquid companies which have low expected distress costs, and that growth options, product market factors, and low asset collateral foster conservative use of debt.
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 2000
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Employee stock options, corporate taxes, and debt policy
Article Abstract:
A study is conducted on various Nasdaq 100 and S&P 100 firms, to examine the relationship between employee stock options and corporate marginal tax rates. The study shows that the reduction of employee stock options can lead to tax savings for the firms.
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 2004
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Debt, leases, taxes, and the endogeneity of corporate tax status
Article Abstract:
We provide evidence that corporate tax status is endogenous to financing decisions, which induces a spurious relation between measures of financial policy and many commonly used tax proxies. Using a forward-looking estimate of before-financing corporate marginal tax rates, we document a negative relation between operating leases and tax rates, and a positive relation between debt levels and tax rates. This is the first unambiguous evidence supporting the hypothesis that low tax rate firms lease more, and have lower debt levels, than high tax rate firms. (Reprinted by permission of the publisher.)
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 1998
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