Graham (00), Jf, How Big Are Tax Benefits Of Debt

THE JOURNAL OF FINANCE VOL. LV, NO. 5 OCT. 2000 How Big ar the Tax Benefits of Debt? JOHN R. GRAHAM* ABSTRACT I integrate chthonic self-coloured-specific benefit functions to estimate that the capitalized revenue benefit of debt equals 9.7 share of firm regard as ~or as first as 4.3 percent, exonerate of personal evaluatees!. The typical firm could double tax income benefits by issuing debt until the marginal tax benefit begins to decline. I hazard how aggressively a firm uses debt by detect the order of its tax benefit function. Paradoxically, large, liquid, profitable firms with low pass judgment trauma costs use debt conservatively. Product market factors, developing options, low asset collateral, and planning for future expenditures lead to conservative debt usage. conservativist debt policy is persistent. DO THE TAX BENEF ITS of debt affect visible pay decisions? How much do they add to firm value? These questions welcome puzzled researchers since the work of Modigliani and Miller ~1958, 1963!. Recent evince indicates that tax benefits are one of the factors that affect financing woof ~e.g., MacKie-Mason ~1990!, whole meal flour ~1996a!!, although opinion is not unharmed on which factors are more or less cardinal or how they contribute to firm value ~Shyam-Sunder and Myers ~1998!, Fama and French ~1998!!.

Researchers wait several problems when they investigate how tax incentives affect integrated monetary policy and firm value. Chief among these problems is the difficulty of reckon corporate tax rates due to data problems and the complexity of the t ax code. Other challenges include quantifyin! g the effects of interest taxation at the personal level and understanding the bankruptcy do by and the attendant costs of financial distress. In this * Graham is at the Fuqua School of Business, Duke University. Early conversations with Rick Green, Eric Hughson, Mike Lemmon, and S. P. Kothari were helpful in formulating some of the ideas in this paper. I thank Peter concomitant for providing the bond...If you want to get a full essay, order it on our website: OrderCustomPaper.com

If you want to get a full essay, visit our page: write my paper