For years, conventional wisdom, based on reams of academic studies, has held that firms actually take on less debt than is optimal. Because interest payments are tax-deductible, the thinking was, these companies give up tax benefits that would boost their bottom lines. That’s the principle that’s driven leveraged buyouts.

If you’ve wondered about the logic behind taking on large amounts of debt (these days, it’s hard not to, of course), a new study from several researchers at Wharton should confirm your skepticism. The study, which is saddled with the unwieldy title “Improved estimates of marginal tax rates: Implications for the under-leverage puzzle,” finds that much of the earlier research on the topic overstated the tax benefits available to firms using debt. That’s because the researchers failed to account for volatility in cash flows and earnings, which, of course, are magnified as companies leverage up. Read this paper.

This fact is probably crystal clear to employees at the Tribune Co., Lyondell Chemical, and other outfits that changed hands via leveraged buyouts and now are clamoring for bankruptcy protection. With the economy in a tailspin and credit tight, the default rate on high-yield corporate debt is expected to just about triple from 2008, rising from 4.4 to 11.7 percent this year, estimates research firm CreditSights.

Fortunately, “most corporations appear to adopt debt policies that efficiently trade off the tax benefits [of debt] with the risk to financial health,” says Wayne Guay, one of the researchers, in a release. While most firms are finding it tough going these days, those that aren’t saddled with colossal debt payments have a clear advantage. ###