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 …

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 or employees. Equity financing generally strengthens a firm's credibility to honor implicit promises …

firm's financing structure. We analyze the interaction between a firm's capital structure and the type of contracts it uses … substantially more equity financing. …