The merits of equity v debt | Debtors' prison | The Economist:If you ever see something in the world that seems bizarre, like rice paddies in the middle of 1970s Tokyo, think tax law and accounting.
... Corporate-finance theory may state that the value of a company should not be affected by its decision to finance itself with equity or debt. But, in practice, interest payments are generally tax-deductible; dividends are not. That gives companies a big push in the direction of debt...
Thursday, February 19, 2009
Why have companies learned to finance operations through debt?