Debt specialisation and diversification: International evidence

Greg Duffee and Peter Hördahl

No 928, BIS Working Papers from Bank for International Settlements

Abstract: We uncover a strong U-shape in bond financing by US firms. Firms with total debt in the range of $10 million to $100 million tend to use much less bond financing relative to loan financing than do firms with more or less total debt. There is no corresponding U-shape in less-developed Asian markets, while the advanced markets of Hong Kong SAR and Korea are in the middle. These patterns, and more generally the cross-firm variation in firms' use of bond financing relative to financing through loan facilities, are largely unrelated to either credit quality or monitoring effectiveness. This suggests that market segmentation is more likely. Finally, we find evidence of debt diversification by highly-leveraged firms.

Keywords: corporate bonds; capital structure; firm financing; debt specialisation; debt diversification (search for similar items in EconPapers)
JEL-codes: G30 G32 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2021-02
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-sea
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