How Do Firms Choose Their Lenders? An Empirical Investigation

Miguel Cantillo and Julian Wright ()
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Miguel Cantillo: University of California, Berkeley

Finance from EconWPA

Abstract: This article investigates which firms borrow directly from the capital markets and which raise funds through intermediaries. Our empirical results show that large companies with abundant cash and collateral tap the credit markets directly. These markets cater to safe and profitable industries, and are most active when riskless rates or intermediary earnings are low. We show that determinants of lender selection sharpen during investment downturns and that there are substantial asymmetries in the way firms enter and exit capital markets. These results support a theoretical framework where intermediaries have better reorganizational skills but a higher cost of capital than bondholders

JEL-codes: G20 G31 G32 E44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk and nep-pke
Date: Written
Note: approx 40 pages

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http://129.3.20.41/eps/fin/papers/9803/9803007.pdf (application/pdf)

Related works:
Working Paper: How Do Firms Choose Their Lenders? An Empirical Investigation (2000)
Journal Article: How Do Firms Choose Their Lenders? An Empirical Investigation (2000)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:9803007

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