Organization Capital and Debt Structure

Abstract

This paper examines the effect of organization capital on corporate debt structure. We find that firms with higher organization capital rely more on unsecured debt. Using state-level unemployment insurance benefits and industry median organization capital as instrumental variables, we identity the causal effect of organization capital on the corporate use of unsecured debt. Our findings are robust to alternative measures and specifications of organization capital and to controlling for tangible assets. We document further evidence that the effect of organization capital on the security of debt is more pronounced among firms in technology industry.

Keywords: Organization capital, Debt structure, Secured debt, Unsecured debt

JEL Classification: E22, G32