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Does the Debt Tax Shield Distort Ownership Efficiency?
Norbäck, Pehr-Johan; Persson, Lars; Tåg, Joacim - 2017
The tax laws of most developed countries are debt biased since firms can deduct interest on debt but not on equity. This bias is known to distort investment decisions. However, less is known about how the debt tax shield affects the ownership of assets when bidders differ financial expertise and...
Persistent link: https://www.econbiz.de/10014194288
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Operating Leverage, Profitability and Capital Structure
Chen, Zhiyao - 2017
Operating leverage increases profitability and reduces optimal financial leverage. Thus, operating leverage generates a … negative relation between profitability and financial leverage that is thought to be inconsistent with the trade-off theory …, but is commonly observed in the data. We demonstrate the effect of operating leverage on firms' profitability and …
Persistent link: https://www.econbiz.de/10012974654
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Refinancing, profitability and capital structure : new evidence
Eckbo, B. Espen; Kisser, Michael - 2018
correlation between leverage and profitability. When rebalancing costs are added to this theory, it predicts a positive leverage-profitability … the theory predicts it should be positive. Our results thus resurrect the leverage-profitability puzzle …
Persistent link: https://www.econbiz.de/10011847874
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Refinancing, Profitability, and Capital Structure
Danis, Andras - 2015
We revisit the well-established puzzle that leverage is negatively correlated with measures of profitability. In … between profitability and leverage is positive. At other times, it is negative. These results are consistent with dynamic … profitability in the quarters prior to rebalancing events match the patterns predicted by these models. Our results are not driven …
Persistent link: https://www.econbiz.de/10013036317
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A Profitable Theory of Corporate Finance
Choi, Hak - 2016
This paper offers an alternative theory of corporate finance, to replace the invalid MM theorem. It derives the optimal amount of fund, which can be equity or debt. It introduces a new concept called marginal yield. It corrects the meaning of borrowing. It reproduces the MM theorem, to show its...
Persistent link: https://www.econbiz.de/10012989765
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Firm Profitability, Inventory Volatility, and Capital Structure
Birge, John R. - 2011
Traditional theories of capital structure imply a consistent relationship between firm profitability and firm leverage …
Persistent link: https://www.econbiz.de/10013121259
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Competition, Profitability and Financial Leverage
Banal-Estanol, Albert; Siciliani, Paolo; Yoon, Kyoungsoo - 2022
We investigate the relationship between profitability and financial leverage for US listed non-financial corporations …-cost mark-ups notwithstanding high product similarity, the relationship between profitability and financial leverage is negative … finance, whereby firms increase their degree of financial leverage in response to profitability improvements. Not only do …
Persistent link: https://www.econbiz.de/10013297000
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Bank capital, liquid reserves, and insolvency risk
Hugonnier, Julien; Morellec, Erwan - 2015
We develop a dynamic model of banking to assess the effects of liquidity and leverage requirements on banks' insolvency risk. In this model, banks face taxation, flotation costs of securities, and default costs and maximize shareholder value by making their financing, liquid asset holdings, and...
Persistent link: https://www.econbiz.de/10011293576
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Relationship capital and financing decisions
Geelen, Thomas; Morellec, Erwan; Rostova, Natalia - 2021
Lending relationships matter for firm financing. In a model of debt dynamics, we study how lending relationships are formed and how they impact leverage and debt maturity choices. In the model, lending relationships evolve through repeated interactions between firms and debt investors. Stronger...
Persistent link: https://www.econbiz.de/10012612803
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Flexible prices and leverage
D'Acunto, Francesco; Liu, Ryan; Pflueger, Carolin; … - 2017
The frequency with which firms adjust output prices helps explain persistent differences in capital structure across firms. Unconditionally, the most exible-price firms have a 19% higher long-term leverage ratio than the most sticky-price firms, controlling for known determinants of capital...
Persistent link: https://www.econbiz.de/10011597779