Year of Graduation
The Influence of Tax Convexity on Optimal Capital Structure
Effective tax rate for firm with profits is different from the one for firm with losses due to existing tax rebates. Therefore tax function must be asymmetric and convex, however many researchers assume that it is linear. This paper investigates the relationship between optimal capital structure and tax convexity. Analysis of data of 37 companies revealed that there is a negative relationship between the researching arguments. This result is consistent with the results of trade-off theory and theoretical Sarkar model, that was a basic model for this research.