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research article
Financing Investment: The choice between bonds and bank loans
2015
We build a 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, with higher bargaining power in default, operating in more competitive product markets, or 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 that supports our theory.
Type
research article
Web of Science ID
WOS:000364828700003
Authors
Publication date
2015
Published in
Volume
61
Issue
11
Start page
2580
End page
2602
Peer reviewed
REVIEWED
EPFL units
Available on Infoscience
February 16, 2016
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