Does Local Capital Supply Matter for Public Firms’ Capital Structures?

Journal of Financial and Quantitative Analysis

57 Pages Posted: 29 Mar 2017 Last revised: 22 Apr 2021

See all articles by Binay Adhikari

Binay Adhikari

University of Texas at San Antonio

David C. Cicero

Harbert College of Business, Auburn University

Johan Sulaeman

National University of Singapore (NUS) - Department of Finance

Date Written: July 10, 2018

Abstract

Publicly listed firms respond to capital supply conditions shaped by local investing preferences. Public firms headquartered in areas with higher proportions of senior citizens and women use more debt financing. These demographics are associated with conservative investing, leading to a higher and more stable local supply of debt capital. The demographics-leverage relation is more pronounced for firms that cannot easily tap public bond markets, which is the majority of public firms. Changes in firms’ financing activities around exogenous shocks to credit supplies – including interstate banking deregulation and the 2008-2009 financial crisis – support the local capital supply hypothesis.

Keywords: Supply of Capital, Local Demographics, Capital Structure, Segmented Markets, Capital Supply

JEL Classification: G01, G20, G21, G3, G32, N2

Suggested Citation

Adhikari, Binay Kumar and Cicero, David C. and Sulaeman, Johan, Does Local Capital Supply Matter for Public Firms’ Capital Structures? (July 10, 2018). Journal of Financial and Quantitative Analysis, Available at SSRN: https://ssrn.com/abstract=2939135 or http://dx.doi.org/10.2139/ssrn.2939135

Binay Kumar Adhikari

University of Texas at San Antonio ( email )

1 UTSA Circle
San Antonio, TX 78249
United States
2104585349 (Phone)

David C. Cicero (Contact Author)

Harbert College of Business, Auburn University ( email )

415 Magnolia Ave.
Auburn, AL 36849
United States

Johan Sulaeman

National University of Singapore (NUS) - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HOME PAGE: http://sites.google.com/site/johansulaeman/

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