Debt and the Marginal Tax Rate

Posted: 28 Dec 1998

See all articles by John R. Graham

John R. Graham

Duke University; National Bureau of Economic Research (NBER)

Date Written: October 1994


Do taxes affect corporate debt policy? This paper answers this question by testing whether the incremental use of debt is positively related to firm-specific, tax-code-consistent marginal tax rates. Using annual data for almost 10,000 firms for the years 1980-1992, evidence is provided which indicates that high-tax-rate firms issue more debt than their low-tax-rate counterparts. The estimated marginal tax rates exhibit substantial cross-sectional and time-series variation.

JEL Classification: G32, H20

Suggested Citation

Graham, John Robert, Debt and the Marginal Tax Rate (October 1994). Available at SSRN:

John Robert Graham (Contact Author)

Duke University ( email )

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