The recent interest in the valuation of the benefits from debt financing arises from the disagreement in the financial literature about the meaning of “value of tax shields.” Although it is accepted that the tax deductibility of interest increases the value of the firm, the correct valuation...

We study how the relative availability of bond and bank financing supply affects the firm's ability to borrow and to use its leverage to buffer shocks. We define a measure that proxies for the regional borrowing inflexibility in the availability of bank and bond financing: “debt...

This paper investigates how capital structure dynamics depend on “systematic” adjustment costs proxied by market imperfections and macroeconomic conditions in a cross-country setting. We document substantial variations in firms' capital structure adjustments across countries as well as over...

We analyze a defaultable firm's optimal capital and debt structures when its debt includes senior straight bonds and either Contingent Convertible or Write-Down bonds. The firm's stakeholders bear a liquidity risk prior to the debt maturity and a solvency risk at maturity. Credit events and...

Capital structure puzzle - how capital structure of a firm is determined, is one of the most hotly contested issues in corporate finance. Many studies have been carried out recently in Indian context too to study this issue - across various industries: Madan (2007) hotel industry, Narayan,...

This study investigates the effects of political uncertainty (PU) on corporate debt maturity and leverage using a novel measure of firm-specific PU. We find that PU is negatively associated with debt maturity and leverage. Furthermore, the negative effects of PU on debt maturity and leverage are...

This study re-examines the impact of asset maturity on debt maturity choices. The pertinent literature suffers from the fact that asset maturity typically is hard to observe. In this paper we exploit the fact that for energy utilities asset maturity can directly be measured. Using a sample of...

The capital structure irrelevance argument of Modigliani and Miller (1958) implies that the use of debt or leases should have no impact on firm values. This classical argument leaves out several important considerations crucial for the result, in particular, counterparty credit risk. We...

This paper explores the dynamic relationship between firm debt and real outcomes using data from 24 European economies over the period of 2000-2018. Based on macro data, it shows that a rise in credit to firms is associated with an increase in employment growth in the short-term, but employment...

Deleveraging, whether via reductions in debt or increases in assets, is costly due to value transfers from shareholders to creditors. It is especially costly in the presence of long-term debt and when the need to deleverage is high. This paper, first, provides empirical evidence consistent with...