Debt Use Boosts Firm Value, But Only Up to a Point
The main goal of the study was to understand how a company's mix of debt and equity (capital structure) affects its overall value. The researchers found that having some debt can increase a company's value, but only up to a certain point. After that, too much debt can actually decrease the value of the company. In simple terms, the study shows that the way a company chooses to finance itself can impact how much it is worth to investors.