The Choice between Bank Debt, Non-Bank Private Debt and Public Debt: Evidence from New Corporate Borrowings

42 Pages Posted: 19 May 2001

See all articles by Vassil T. Mihov

Vassil T. Mihov

Texas Christian University - M.J. Neeley School of Business

David J. Denis

University of Pittsburgh

Date Written: June 2002

Abstract

Using a sample of 1,560 new debt financings, we examine the choice among bank debt, non-bank private debt, and public debt. The primary determinant of the debt source is the credit qualit y of the issuer. Firms with the highest credit quality borrow from public sources, firms with medium credit quality borrow from banks, and firms with the lowest credit quality borrow from non-bank private lenders. Non-bank private debt thus plays a unique role in accommodating the financing needs of firms with low credit quality. In addition, the choice of debt source is (weakly) influenced by managerial discretion.

Suggested Citation

Mihov, Vassil T. and Denis, David J., The Choice between Bank Debt, Non-Bank Private Debt and Public Debt: Evidence from New Corporate Borrowings (June 2002). Available at SSRN: https://ssrn.com/abstract=269129 or http://dx.doi.org/10.2139/ssrn.269129

Vassil T. Mihov (Contact Author)

Texas Christian University - M.J. Neeley School of Business ( email )

Fort Worth, TX 76129
United States
817-257-7147 (Phone)
817-257-7227 (Fax)

David J. Denis

University of Pittsburgh ( email )

Katz Graduate School of Business
Pittsburgh, PA 15260
United States
412-648-1708 (Phone)

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