Collateral and the Choice Between Bank Debt and Public Debt

Leming Lin ()
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Leming Lin: Katz Graduate School of Business, University of Pittsburgh, Pittsburgh, Pennsylvania 15260

Management Science, 2016, vol. 62, issue 1, 111-127

Abstract: This paper tests how collateral value affects a firm’s choice between bank debt and public debt by considering the exogenous variation in the market value of a firm’s real-estate assets caused by fluctuations in local real-estate prices. Using local land supply elasticities as an instrument for local real-estate prices, I estimate that a one-standard-deviation increase in collateral value causes bank debt as a fraction of total debt to increase by six percentage points. This paper was accepted by Wei Jiang, finance .

Keywords: debt structure; collateral; bank debt; bonds; public debt; real estate (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:62:y:2016:i:1:p:111-127

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