Abstract
This paper investigates whether the negative relationship between firm debt levels and investment opportunity sets can be explained by tax considerations. The usual explanation for the inverse relationship is asymmetric information and agency problems. It is possible that tax considerations and especially non-debt tax shields could also explain the relationship. The results indicate that the inverse relationships is robust to the inclusion of non-debt tax shields and other determinants of leverage. In short, the results indicate that agency cost and information asymmetry explanations for leverage are important.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
