Existing theories of a firm\'s optimal capital structure seem to fail in explaining why many healthy and profitable firms rely heavily on equity financing, even though benefits associated with debt (like tax shields) appear to be high and the bankruptcy risk low. This holds in particular for...

Taxes play an important role in determining the capital structure of companies. Consequently,a multinational company would choose its capital structure according to differencesin international taxation. Unlike purely national firms, multinationals can also use intercompanyloans to shift profits...