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
Date Written: July 1, 2014
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: Suggested Citation