How Does Access to the Unsecured Debt Market Affect Investment?

Kizkitza Biguri

Journal of Banking & Finance, 2023, vol. 152, issue C

Abstract: I analyze the relevance of debt composition (secured versus unsecured) for the association between collateral and investment. I study a negative shock to the cost and availability of unsecured debt. A decrease in the share of unsecured debt leads to a reduction in investment. The substitution toward secured debt results in asset encumbrance, higher interest rates, and the presence of covenants. The minimization of financing costs is one mechanism through which the priority composition of debt impacts investment. The results complement evidence on the collateral channel with a novel focus on debt structure.

Keywords: Unsecured debt; Debt structure; Financial constraints; Investment; Collateral; Creditor conflict (search for similar items in EconPapers)
JEL-codes: E44 G1 G31 G32 G35 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:152:y:2023:i:c:s0378426623000808

DOI: 10.1016/j.jbankfin.2023.106856

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