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The Choice of Debt Source by UK Firms
Author(s) -
Marshall Andrew,
Mccann Laura,
Mccolgan Patrick
Publication year - 2016
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/jbfa.12194
Subject(s) - debt , collateral , internal debt , business , reputation , recourse debt , debt levels and flows , financial system , senior debt , debt to gdp ratio , monetary economics , maturity (psychological) , debt ratio , sample (material) , external debt , economics , finance , psychology , social science , developmental psychology , chemistry , chromatography , sociology
We examine the choice of borrowing source among public debt, syndicated bank loans, bilateral bank loans and non‐bank private debt. Using a sample of 400 non‐financial firms over the period 2000–2012, we find strong support for the reputational theory of borrowing source. Larger firms are more likely to borrow in public debt markets. Bank dependent firms are less likely to borrow in public debt markets and choose between bank and non‐bank private debt based on maturity, collateral available to lenders and other firm characteristics. These results are consistent with the role of borrower reputation being the primary determinant of borrowing source for UK listed firms.