The Tax Advantages of Refund

Volume 22 Number 4

Financial Management, 1993, vol. 22, issue 4

Abstract: A tax advantage is one of the major motivations cited in the literature for including a call provision in a debt indenture. Previous studies have demonstrated that, for tax reasons, issuing callable debt dominates issuing debt that cannot be prematurely retired. However, similar tax benefits may also be obtained when firms include in the debt indenture provisions that facilitate alternative refunding mechanisms.

Date: 1993
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