Debt, tax shield and bankruptcy costs: Some evidence from JSE

Extracted from text ... Number 54 - Part 3 M Negash* Debt, tax shield and bankruptcy costs: Some evidence from JSE *School of Accountancy, The University of the Witwatersrand, Private Bag 3, Wits 2050, Republic of South Africa. Email: mnegash@isys.wits.ac.za 1. Introduction One of the contentious issues of corporate finance is the theory of capital structure. Modigiliani and Miller (1963) show the 'irrelevance' of capital structure in the absence of market imperfections. This conclusion however changes when market imperfections are invoked. When corporate taxes are considered and the firm is allowed to source its finances both from owners and lenders, the value of the ..