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Firm location and corporate debt

Matteo P. Arena and Michaël Dewally

Journal of Banking & Finance, 2012, vol. 36, issue 4, 1079-1092

Abstract: This study examines the influence of a firm’s geographical location on corporate debt and provides evidence that the higher cost of collecting information on firms distant from urban areas has significant implications on a wide array of corporate debt characteristics. We find that rural firms face higher debt yield spreads and attract smaller and less prestigious bank syndicates than urban firms. Rural firms attempt to reduce their informational disadvantage by relying more on relationship banking. Our results on the effect of location on corporate debt are robust to the inclusion of an extensive set of firm and issue characteristics.

Keywords: Corporate location; Debt underwriting; Cost of debt; Debt maturity; Capital structure (search for similar items in EconPapers)
JEL-codes: G32 G21 G24 (search for similar items in EconPapers)
Date: 2012
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Handle: RePEc:eee:jbfina:v:36:y:2012:i:4:p:1079-1092