things, the theory predicts that the difference in leverage between a debt-friendly bankruptcy code (such as the UK’s) and a … (debt net of cash holdings) and controlling for other firm characteristics that affect leverage. … find the theory is strongly backed by the data. The results are robust to considerations such as employing net leverage …

equity to that based on debt-like hybrid claims such as preferred equity and subordinated debt. The erosion of common equity … represent a transfer from creditors (and potentially taxpayers) to equity holders in violation of the priority of debt over …

privately-optimal level of bank leverage is neither too low nor too high: It efficiently balances the market discipline that … owners of risky debt impose on managerial shirking in monitoring loans against the asset substitution induced at high levels … of leverage. However, when correlated bank failures can impose significant social costs, regulators may bail out bank …

tax burden. We study this trade-off in a model with distortionary taxes and endogenous rationing of external finance. The …, especially in firms that depend more on external finance, and are negatively correlated with tax pressure. Second, transparency … is negatively correlated with tax pressure, particularly in sectors where firms are less dependent on external finance …