Debt Structure

Abstract

We review the literature on debt structure, which is a central element in a firm’s capital structure. We first survey both theoretical and empirical research pertaining to debt characteristics – maturity and priority – and debt types – bank loans, corporate bonds, credit lines, commercial paper, and capital leases. We then present comprehensive empirical evidence on public U.S. firms’ debt structure over the period 2002-2018, highlighting that over three-quarters of U.S. firms concentrate their borrowing in one debt type, and offer some suggestive explanations for the observed pattern. Finally, we discuss directions for future research, including a better understanding of debt structure choices by non-U.S. firms and by private firms, the cross-sectional and temporal variations in debt structure, the corporate policy implications of firms’ debt structure choices, and the interaction between types of assets and debt structure.

Keywords: capital structure; debt structure; debt specialization; maturity; priority; bank loans; corporate bonds; credit lines; commercial paper; capital leases; bankruptcy costs; creditor conflicts; coordination failure; information asymmetry; credit market access; types of assets

JEL Classification: G32