In this paper we analyze the leverage and dividend choices than 6,700 industrial
corporations over a 30-year period. Our empirical analysis is designed to provide
a basis for assessing the relative importance of the various factors - taxes, contracting
costs (particularly, the financial distress costs and the "free cash flow" benefits
of debt), and signaling effects - in explaining corporate financial behavior. Such
findings can than be used to guide corporate managers in thinking about trade-offs
among different leverage and dividend choices.