Does the Source of Capital Affect Capital Structure?

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ID: 292277
2005
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Abstract
Prior work on leverage implicitly assumes capital availability depends solely on firm characteristics. However, market frictions that make capital structure relevant may also be associated with a firm's source of capital. Examining this intuition, we find firms that have access to the public bond markets, as measured by having a debt rating, have significantly more leverage. Although firms with a rating are fundamentally different, these differences do not explain our findings. Even after controlling for firm characteristics that determine observed capital structure, and instrumenting for the possible endogeneity of having a rating, firms with access have 35% more debt.
Reference Key
openalex_W3022374830 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Michael W. Faulkender, Mitchell A. Petersen
Journal review of financial studies
Year 2005
DOI
10.1093/rfs/hhj003
URL
https://doi.org/10.1093/rfs/hhj003
Keywords Keywords not found

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