European Business Schools Librarian's Group

Les Cahiers de Recherche,
HEC Paris

No 1010: Financing Investment: The Choice between Bonds and Bank Loans

Erwan Morellec (), Philip Valta () and Alexei Zhdanov ()

Abstract: We build a dynamic model of investment and financing decisions to study the choice between bonds and bank loans in a firm's marginal financing decision and its effects on corporate investment. We show that firms with more growth options, higher bargaining power in default, operating in more competitive product markets, and facing lower credit supply are more likely to issue bonds. We also demonstrate that, by changing the cost of financing, these characteristics affect the timing of investment. We test these predictions using a sample of U.S. firms and present new evidence which supports our theory.

Keywords: debt structure; capital structure; investment; credit supply; competition

JEL-codes: D83; G12; G32; G33

47 pages, December 10, 2013

Full text files

papers.cfm?abstract_id=2162896 PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Antoine Haldemann ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-02-22 16:53:02.