, investor taxes and risky debt. However, their analysis assumes zero recovery in default. We extend their framework to allow for … anticipated recovery in default, yet small. The "cost of debt" in the tax adjusted discount rate formula is the debt’s yield …

state and regulators are not necessarily independent. Among other things, we show that firms invest more, issue more debt …

aggressive', in which case they accept negative-NPV projects. In the first case, the uniquely optimal security is debt. In the … second case, it is levered equity. Debt maximizes lenders’ payoffs from financing low-NPV projects, i.e., projects that have … that are relatively likely to break even are financed with debt, while less profitable projects are financed with equity …

their informational advantage in the future. We point out that the strategic use of debt by an uninformed party induces … that (renegotiable) debt is a credible commitment to end the long-term relationship if information is not revealed. We show … that the strategic advantage of debt increases with good durability and we briefly address the financing decision of a …

We analyze the optimal debt structure of multinational corporations choosing between centralized or decentralized …

financed. Debt offers little flexibility relative to equity. The flexibility offered by equity depends, however, on the extent … high. The firm’s optimal security-issuance choice trades the flexibility benefit of equity against the now-familiar debt …, and depends on the firm’s stock price, implying that firms issue equity when stock prices are high, and debt when stock …

such as asset volatility, the growth rate, the effective corporate tax rate, debt call features and transactions costs. We …