Finance & Accounting

Should Companies Borrow More When Tax Rates Are High

Professor John Graham studied a century of financial data and found that companies react to tax hikes by borrowing more, but only during investment cycles

Conventional wisdom in finance holds that higher corporate tax rates make debt more attractive for companies. When deciding whether to finance investments by borrowing money or by raising equity from shareholders, debt can be cheaper. “Interest on debt is tax deductible,” said John Graham, the D. Richard Mead, Jr. Family… read more