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International Journal of Management Vol. 28 No. 4 Part 2 Dec 2011 199 The Effect of Firm Characteristics on Choice of Debt Financing Halil D. Kaya Eastern Kentucky University This study examines the effects of a firm’s credit rating, size, market-to-book ratio, profitability, degree of leverage, and tangible assets on its choice of debt financing. Using a comprehensive U.S. sample of 3077 public debt offerings, 2164 private placements/144a issues, and 6903 syndicated bank loan agreements downloaded from the Security Data Company’s New Issues Database, I find several interesting results for the period 1984 to 2004. I find that, while larger and highly rated firms with a lot of tangible assets tend to prefer public debt to private placements/144a issues, non-rated firms with relatively high M/B ratios tend to do the opposite. When choosing between public debt financing and syndicated bank loan financing, while large, highly rated, but at the same time, highly levered firms with a lot of tangible assets tend to prefer public debt financing, non-rated firms with relatively high M/B ratios tend to prefer syndicated bank loan financing. Finally, when choosing between private placement/144a financing and syndicated bank loan financing, while large, highly levered firms with a lot of tangible assets tend to prefer private placement/144a financing, non-rated firms with relatively high M/B ratios tend to prefer syndicated bank loan financing. Introduction In this paper, I focus on three different debt financing events, the public debt offering, the private placement/144a issue, and the syndicated bank loan agreement, in an attempt to measure the impact of firm-specific factors on firms’ financing choice. In other words, I attempt to answer these two questions: (1) What are the factors that affect a firm’s decision to use a s