Open AccessThe The Shift in Firms’ Reliance on Debt Sources
Author(s) -
Tu Ho
Publication year - 2019
Publication title -
applied finance letters
Language(s) - English
Resource type - Journals
eISSN - 2253-5802
pISSN - 2253-5799
DOI - 10.24135/afl.v8i0.141
Subject(s) - debt , recourse debt , internal debt , debt levels and flows , debt to gdp ratio , senior debt , external debt , business , debt ratio , monetary economics , capital structure , financial system , debt service ratio , finance , economics
Structural changes in capital market and information innovations have altered characteristics of debt sources, make them more or less favourable to firms. This could possibly lead to a shift in firms' reliance on debt sources. Using a unique data set of debt mix of 1,100 U.S. non-financial firms, I conduct data analysis to reveal changes in firms' preference for different debt sources over a decade from 2004 to 2014. I find that bank debt remains the most common source of borrowing, followed by public debt and finally private placement debt. In addition, over time, firms have become more reliant on bank and public debt while less reliant on private placement debt. This pattern is consistent across different industries.