Collateral and the Choice Between Bank Debt and Public Debt

Management Science, 2016, 62 (1) 111-127

33 Pages Posted: 30 Mar 2013 Last revised: 22 Apr 2019

See all articles by Leming Lin

Leming Lin

University of Pittsburgh - Katz Graduate School of Business

Date Written: July 1, 2014

Abstract


This paper tests how collateral value affects a firm's choice between bank debt and public debt by considering the exogenous variation in the market value of a firm's real estate assets caused by fluctuations in local real estate prices. Using local land supply elasticities as an instrument for local real estate prices, I estimate that a one standard deviation increase in collateral value causes bank debt as a fraction of total debt to increase by 6 percentage points.

Keywords: Debt structure, Collateral, Bank debt, Bonds, Public debt

JEL Classification: G32

Suggested Citation

Lin, Leming, Collateral and the Choice Between Bank Debt and Public Debt (July 1, 2014). Management Science, 2016, 62 (1) 111-127. Available at SSRN: https://ssrn.com/abstract=2240993 or http://dx.doi.org/10.2139/ssrn.2240993

Leming Lin (Contact Author)

University of Pittsburgh - Katz Graduate School of Business ( email )

346 Mervis Hall
University of Pittsburgh
Pittsburgh, PA 15260
United States

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