The impact of firm size on bank debt use

Linda M. Hooks

Review of Financial Economics, 2003, vol. 12, issue 2, 173-189

Abstract: I use a sample of US firms to examine the determinants of the concentration of bank debt in total debt. The results indicate that the factors vary by size of the firm. A small‐ to medium‐sized firm has a high concentration of bank debt when it has a low level of discretionary spending. In contrast, a large firm has a high concentration of bank debt when it is difficult for outsiders to observe. The results support the Diamond [J Polit Econ 99 (1991) 689] reputation view that a firm faces different debt choices as it grows. When evaluating bank regulations, policymakers should consider the importance of the reputation‐building services, which a bank provides to businesses.

Date: 2003
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https://doi.org/10.1016/S1058-3300(02)00064-2

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Persistent link: https://EconPapers.repec.org/RePEc:wly:revfec:v:12:y:2003:i:2:p:173-189

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