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Switching to bonds when loans are scarce: Evidence from four U.S. crises

Manisha Goel and Michelle Zemel

Journal of Corporate Finance, 2018, vol. 52, issue C, 1-27

Abstract: To what extent do public firms switch to bonds when bank credit supply falls, and how do their real outcomes compare to those of other firms? Examining four U.S. crises during 1988–2011 shows that only 8.4% of debt-receiving firms broke their reliance on loans and switched to bonds. These were high quality firms that, despite incurring large costs, did not suffer significantly more in output, investment, and employment than predominantly bond-issuing firms. Most firms either received loans, or no debt, and fared significantly worse. Thus, public firms do not widely substitute bonds for loans, remaining vulnerable to bank health fluctuations.

Keywords: Financial crises; Corporate finance; Banks; Bonds; Employment; Output; Investment (search for similar items in EconPapers)
JEL-codes: E44 G01 G30 (search for similar items in EconPapers)
Date: 2018
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