Capital Structure and Debt Structure
Joshua D. Rauh
Stanford Graduate School of Business; National Bureau of Economic Research (NBER)
University of Chicago - Booth School of Business; NBER
February 17, 2010
AFA 2009 San Francisco Meetings Paper
EFA 2008 Athens Meetings Paper
Using a novel data set that records individual debt issues on the balance sheets of public firms, we demonstrate that traditional capital structure studies that ignore debt heterogeneity miss substantial capital structure variation. Relative to high credit quality firms, low credit quality firms are more likely to have a multi-tiered capital structure consisting of both secured bank debt with tight covenants and subordinated non-bank debt with loose covenants. We discuss the extent to which these findings are consistent with existing theoretical models of debt structure in which firms simultaneously use multiple debt types to reduce incentive conflicts.
Number of Pages in PDF File: 56
Keywords: debt structure, bank debt, monitoring, credit ratings, private placements, commercial paper, convertible debt
JEL Classification: G32, G33, G21, M41
Date posted: March 19, 2008 ; Last revised: February 18, 2010
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