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- Title
Estimating the Tax Advantage of Corporate Debt.
- Authors
CORDES, JOSEPH J.; SHEFFRIN, STEVEN M.
- Abstract
This paper presents estimates of the effective tax value of incremental interest deductions for corporations taking into account that they may not be able to utilize all their interest deductions fully because of either insufficient taxable income or the availability of nondebt tax shields. After describing particular features of the tax code which may drive a wedge between statutory and effective tax rates for debt finance, we present estimates using the Treasury Corporate Tax Model of effective tax rates for a variety of industry groupings. Our estimates suggest that the after-tax cost of debt varies widely across industries.
- Subjects
CORPORATE debt; TAX deductions; CORPORATE taxes; INTERNAL revenue law; TAX rates; INTEREST rates; CORPORATE debt financing; FINANCE literature; CAPITAL structure; TAXATION of business losses; INCOME tax deductions for losses
- Publication
Journal of Finance (Wiley-Blackwell), 1983, Vol 38, Issue 1, p95
- ISSN
0022-1082
- Publication type
Article
- DOI
10.1111/j.1540-6261.1983.tb03628.x