This paper argues that trade liberalization has a potentially significant impact on financial leverage. We compare the predictions of the trade-off model of capital structure with the pecking order model. In the first case, we suggest that trade liberalization affects the trade-off between the tax advantages of debt and expected bankruptcy costs. This implies that a reduction in domestic tariff...

Information opacity leads to information asymmetry. In this situation, in providing their own financial needs, firms face limitations and inevitably provide their financial needs from the debt market by signalling private information to it. In addition, information opacity affects the leverage adjustment speed. This research investigates the effect of information opacity on deviation from targe...

We empirically examine whether firms increase financial leverage following mergers. Firms could increase financial leverage either because of an increase in debt capacity or because of unused debt capacity from pre-merger years. We find that financial leverage of combined firms increases significantly following mergers. A cross-sectional analysis shows that the change in financial leverage arou...

the corporate income tax rate plays a worthwhile role in developing fiscal and tax policies for companies, lawmakers and analysts. so, one of the most important issues in tax field, is to determine effective tax rates. the study and scientific calculations of the effective tax rates provide an enhanced tax justice and a careful study of tax pressure on taxpayers would be possible. the objective...

This paper investigates how financial-sector leverage affects macroeconomic instability and welfare. In the model, banks borrow (use leverage) to allocate resources to productive projects and provide liquidity. When banks do not actively issue new equity, aggregate outcomes depend on the level of equity in the financial sector. Equilibrium is inefficient because agents do not internalize how th...

The purpose of this study is to examine the factors that influence financial leverage of small business firms in India. This study also seeks to extend the findings of Michaelas et al. (1999). Small business owners from Punjab area of India were surveyed in order to gather information. Subjects were asked about their perceptions, beliefs, and feelings regarding the factors that influence financ...