Fahn, Matthias; Merlo, Valeria; Wamser, Georg - CESifo - 2014
firms rely heavily on equity financing, even though benefits associated with debt (like tax shields) appear to be high and … popular among employees. We demonstrate that such financing behavior may be driven by implicit arrangements made between a … firm and its managers/employees. Equity financing generally strengthens a firm’s credibility to honor implicit promises …