Debt Specialization

49 Pages Posted: 19 Mar 2011 Last revised: 7 Sep 2012

See all articles by Kai Li

Kai Li

University of British Columbia (UBC) - Sauder School of Business; Asian Bureau of Finance and Economic Research (ABFER); China Academy of Financial Research (CAFR); European Corporate Governance Institute (ECGI); Canadian Sustainable Finance Network (CSFN)

Paolo Colla

Bocconi University - Department of Finance; Bocconi University - BAFFI Center on International Markets, Money, and Regulation

Filippo Ippolito

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences; Barcelona Graduate School of Economics; Centre for Economic Policy Research (CEPR)

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Date Written: September 6, 2012

Abstract

This paper examines debt structure using a new and comprehensive database on types of debt employed by public U.S. firms. We find that 85% of the sample firms borrow predominantly with one type of debt, and the degree of debt specialization varies widely across different subsamples — large rated firms tend to diversify across multiple debt types, while small unrated firms specialize in fewer types. We suggest several explanations for why debt specialization takes place, and show that firms employing few types of debt have higher bankruptcy costs, are more opaque, and lack access to some segments of the debt markets.

Keywords: debt specialization, debt structure, commercial paper, revolving credit facilities, term loans, senior bonds and notes, subordinate bonds and notes, capital leases

JEL Classification: G32

Suggested Citation

Li, Kai and Colla, Paolo and Ippolito, Filippo and Ippolito, Filippo, Debt Specialization (September 6, 2012). AFA 2012 Chicago Meetings Paper, Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1786708 or http://dx.doi.org/10.2139/ssrn.1786708

Kai Li (Contact Author)

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Paolo Colla

Bocconi University - Department of Finance ( email )

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Bocconi University - BAFFI Center on International Markets, Money, and Regulation ( email )

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Filippo Ippolito

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

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Barcelona Graduate School of Economics ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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