Firms’ Bond Market Access and Impact on Bank Borrowing Costs

Jang Ping Thia () and Xinyu Kong ()
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Jang Ping Thia: Asian Infrastructure Investment Bank
Xinyu Kong: Asian Infrastructure Investment Bank

Journal of Financial Services Research, 2025, vol. 68, issue 1, No 2, 74 pages

Abstract: Abstract This paper documents that companies with bond issuance are larger, are more leveraged, and have higher financing needs, but have lower observed syndicated loan spreads. Using endogenous treatment and outcome estimations, we find that companies would potentially face an average of 114 to 185 basis points (bps) higher loan spreads in counterfactual absence of bond market access, significantly larger than observational difference (57 bps) or existing estimates in the literature. This finding underscores the importance of bond markets for corporate financing and overcoming lending constraints or market power of banks, and also casts doubt on valued banking services as the explanation why loans are more costly to bonds. We also find bond issuance as information release a partial explanation only.

Keywords: Syndicated loans; Bonds; Loan spreads; Corporate finance (search for similar items in EconPapers)
JEL-codes: E44 G20 G30 G32 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10693-024-00424-y

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