Debt Specialization

56 Pages Posted: 11 Dec 2009 Last revised: 28 Mar 2012

See all articles by Paolo Colla

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)

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)

Date Written: March 26, 2012

Abstract

This paper examines debt structure using a new and comprehensive database on types of debt employed by publicly listed U.S. firms. We find that specialization in a single debt type is a widespread phenomenon, and that the degree of 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 examine possible explanations for this phenomenon and show that specialization is driven by its economic benefits in the forms of lower bankruptcy costs, economies in information collection costs, and enhanced incentives to monitor. We then examine the role of credit constraints as captured by firms’ not having a credit rating, and show that debt specialization is also driven by constrained access to public debt markets.

Keywords: debt specialization, debt structure, commercial paper, drawn credit lines, term loans, senior bonds and notes, subordinated bonds and notes, capital leases

JEL Classification: G32

Suggested Citation

Colla, Paolo and Ippolito, Filippo and Ippolito, Filippo and Li, Kai, Debt Specialization (March 26, 2012). Available at SSRN: https://ssrn.com/abstract=1520902 or http://dx.doi.org/10.2139/ssrn.1520902

Paolo Colla

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

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

Milano, 20136
Italy

Filippo Ippolito (Contact Author)

Barcelona Graduate School of Economics ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

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

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
(+34) 93 542 2578 (Phone)
(+34) 93 542 1746 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Kai Li

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8353 (Phone)
604-822-4695 (Fax)

HOME PAGE: http://https://sites.google.com/view/kaili/home

Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

China Academy of Financial Research (CAFR) ( email )

1954 Huashan Road
Shanghai P.R.China, 200030
China

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Canadian Sustainable Finance Network (CSFN) ( email )

Queens University
Kingston, ON
Canada

HOME PAGE: http://https://smith.queensu.ca/centres/isf/research/network.php

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