The choice among bank debt, non-bank private debt, and public debt evidence from new corporate borrowings文档.pdfVIP

ARTICLE IN PRESS Journal of Financial Economics 70 (2003) 3–28 The choice among bank debt, non-bank private debt, and public debt: evidence from new corporate borrowings $ David J. Denisa,*, Vassil T. Mihovb a Krannert Graduate School of Management, Purdue University, West Lafayette, IN 47907-1310, USA b M.J. Neeley School of Business, Texas Christian University, Fort Worth, TX 76129, USA Received 10 May 2001; received in revised form 2 May 2002; accepted 2 May 2002 Abstract Using a sample of 1,560 new debt financings, we examine the choice among bank debt, non bank private debt, and public debt. The primary determinant of the debt source is the credit quality of the issuer. Firms with the highest credit quality borrow from public sources, firms with medium credit quality borrow from banks, and firms with the lowest credit quality borrow from non-bank private lenders. Non-bank private debt thus plays a unique role in accommodating the financing needs of firms with low credit quality. In addition, the choice of debt source is (weakly) influenced by managerial discretion. r 2003 Elsevier B.V. All rights reserved. JEL classification: G32; G33 Keywords: Banks; Private debt; Public debt; Debt policy $ This paper has benefited from comments received from Chris Barry, Diane Denis, Joel Houston, Shane Johnson, Erik Lie, John McConnell, Raghu Rau, Andy Waisburd, an anonymous referee, finance workshop participants at Concordia University, Purdue University, Santa Clara University, Texas Christian University, Texas Tech University, University of North Carolina-Chapel Hill, and York University, and participants at the Second Frank Batten Young Scholar Conference at the College of William and Mary. Mihov thanks the Charles Tandy American Enterp