Financing Investment: The Choice Between Bonds and Bank Loans

Valta, Philip; Morellec, Erwan; Zhdanov, Alexei (2015). Financing Investment: The Choice Between Bonds and Bank Loans. Management Science, 61(11), pp. 2580-2602. INFORMS 10.1287/mnsc.2014.2005

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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.

Item Type:

Journal Article (Original Article)

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Business Management > Institute of Financial Management

UniBE Contributor:

Valta, Philip

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

ISSN:

1526-5501

Publisher:

INFORMS

Language:

English

Submitter:

Karin Dolder

Date Deposited:

11 Aug 2016 09:54

Last Modified:

15 Aug 2016 10:59

Publisher DOI:

10.1287/mnsc.2014.2005

BORIS DOI:

10.7892/boris.85640

URI:

https://boris.unibe.ch/id/eprint/85640

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