Corporate Debt Management and the Value of the Firm

Wilbur G. Lewellen, Douglas Emery

Research output: Contribution to journalArticle

21 Citations (Scopus)

Abstract

Three alternative characterizations of corporate debt management policy, which have had wide currency in the literature, are examined. They are shown to give rise to substantial differences in their predictions of total-firm value. This study concludes that, of the three, the one that assumes that management periodically rebalances the firm's debt levels in response to evolving new information on expected future operating cash flows is the most logically consistent. On that basis, a reinterpretation of the available empirical evidence on the ‘Tax effect' of debt is indicated.

Original languageEnglish (US)
Pages (from-to)415-426
Number of pages12
JournalJournal of Financial and Quantitative Analysis
Volume21
Issue number4
DOIs
StatePublished - Jan 1 1986
Externally publishedYes

Fingerprint

Corporate debt
Debt management
Debt
Empirical evidence
Firm value
Prediction
Currency
Operating cash flows
Tax effects

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Corporate Debt Management and the Value of the Firm. / Lewellen, Wilbur G.; Emery, Douglas.

In: Journal of Financial and Quantitative Analysis, Vol. 21, No. 4, 01.01.1986, p. 415-426.

Research output: Contribution to journalArticle

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