What i have studied from school 0024

at the expense of debt holders Manipulation like this raises debt financing agency expenses and lowers debt financing levels (Deesomsak et al , 2004) Non debt tax shield Non debt tax shields are eleme.

at the expense of debt holders Manipulation like this raises debt financing agency expenses and lowers debt financing levels (Deesomsak et al., 2004) • Non-debt tax shield Non-debt tax shields are elements other than interest expenditures that contribute to lower tax payments, such as the tax deduction for depreciation and provision for bad debts Corporations with non-debt tax shelters are less likely to fully utilize the debt tax shelter provided by debt interests To put it another way, companies that have enough tax credits from investments or depreciation deductions are less inclined to use debt financing The idea is that non-debt tax shelters can be used in place of debt-related tax shelters As a result, there should be a negative link between non-debt tax shelters and debt financing • Probability of bankruptcy Because a higher risk of bankruptcy entails a higher cost of bankruptcy, the trade- off theory predicts a negative link between risk of bankruptcy and debt financing (Kayo and Kimura, 2011) Larger firms, on the other hand, are more diversified and have a more predictable cash flow As a result, the likelihood of a large company going bankrupt is lower than that of a small one Larger profitable enterprises, according to the pecking order concept, should spend more of their internally produced money, decreasing debt financing levels According to the pecking order concept, huge firms with a lower risk of insolvency can have lower debt financing levels 1.3.2 External factors (Macro environment) Macroeconomic variables are regional or national economic factors that impact corporate financial strategy, particularly debt financing decisions, from the outside The literature on financial management emphasizes the importance of macroeconomic conditions in determining a firm's capital structure decisions The gross domestic product (GDP), inflation rate, interest rate, financial institution activities, and industry median are all frequent macroeconomic factors that impact corporate debt financing decisions, according to recent and previous literature Corporations' debt financing decisions are influenced by the macroeconomic factors listed below