Corporate tax and capital structure: some evidence and implications

Extracted from text ... Number 56 - Part 2 M Negash* Corporate tax and capital structure: some evidence and implications *The University of the Witwatersrand, Johannesburg, Private Bag 3, Wits 2050, Republic of South Africa. Email: Negashm@soa.wits.ac.za 1. Introduction Four decades of research on capital structure has not conclusively answered the basic question of whether there is an optimal mix of debt and equity at the level of the firm. Textbooks present the issue as a problem of balancing the gains from leverage with the expected costs of bankruptcy (Gitman 2000, Ross, Westerfield and Jaffe 1999, Damodaran 1997, Altman 1993). Following the trade-off theory ..