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Debt Specialization

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

Kai Li

University of British Columbia (UBC) - Sauder School of Business; China Academy of Financial Research (CAFR)

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, 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)

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://finance.sauder.ubc.ca/~kaili

China Academy of Financial Research (CAFR)

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

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

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)

Barcelona Graduate School of Economics ( email )

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

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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