Bank Finance versus Bond Finance

Fiorella De Fiore and Harald Uhlig ()

Journal of Money, Credit and Banking, 2011, vol. 43, issue 7, 1399-1421

Abstract: We present a model with agency costs where heterogeneous firms raise finance through either bank loans or corporate bonds and where banks are more efficient than the market in resolving informational problems. We document some major long‐run differences in corporate finance between the United States and the euro area, and show that our model can explain those differences based on information availability. The model fits the data best when the euro area is characterized by lower availability of public information about corporate credit risk relative to the United States, and when European firms value more than United States firms banks’ flexibility and information acquisition role.

Date: 2011
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https://doi.org/10.1111/j.1538-4616.2011.00429.x

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Journal Article: Bank Finance versus Bond Finance (2011)
Working Paper: Bank Finance Versus Bond Finance (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:43:y:2011:i:7:p:1399-1421

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