A Pedagogical Framework for Capital Structure: Incorporating Non-Tax Advantages of Leverage

Authors

Abstract

This paper is a pedagogical tool suitable for advanced master-level courses or introductory PhD-level courses. College textbooks present a framework of capital structure that incorporates tax-driven theories but often excludes the non-tax advantages of debt. Some textbooks discuss the non-tax-driven advantages of debt but they are never reflected back into the original framework– a void that this paper attempts to fill. I present a comprehensive framework that illustrates the fact that leveraged firms gain additional value beyond tax-deductibility.

Recommended Citation

(2013) "A Pedagogical Framework for Capital Structure: Incorporating Non-Tax Advantages of Leverage," Journal of Economics and Finance Education: Vol. 12: Iss. 1, Article 7.
Available at: https://scholarship.rollins.edu/jefe/vol12/iss1/7