Data Update 6 for 2023: A Wake up call for the Indebted?
The second is that borrowing money will increase perceived default risk, and if the company is rated, lower ratings, and that too is true, but borrowing money at a BBB rating, with the tax benefit incorporated, might still yield a lower cost of funding that staying at a AA rating, with no debt in use.
Do companies consider the trade off between tax benefits and bankruptcy costs when borrowing money?