Financing Investment: The Choice Between Bonds and Bank Loans

Valta, Philip; Zhdanov, Alexei; Morellec, Erwan

doi:10.1287/mnsc.2014.2005

Scientific article

English

Financing Investment: The Choice Between Bonds and Bank Loans

Contributors

Valta, Philip; Zhdanov, Alexei; Morellec, Erwan

Published in

Management science, vol. 61, no. 11, p. 2549-2824

Publication date

2015

Abstract

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.

Keywords

Debt choice
Capital structure
Investment
Credit supply
Competition

UNIGE affiliation entities

Faculté d'économie et de management / Geneva Finance Research Institute

Citation (ISO format)

VALTA, Philip, ZHDANOV, Alexei, MORELLEC, Erwan. Financing Investment: The Choice Between Bonds and Bank Loans. In: Management science, 2015, vol. 61, n° 11, p. 2549–2824. doi: 10.1287/mnsc.2014.2005

Article (Published version)

Identifiers

PID : unige:73274
DOI : 10.1287/mnsc.2014.2005

Journal ISSN

0025-1909

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Creation

07/06/2015 16:45:00

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07/06/2015 16:45:00

Update

14/03/2023 23:23:01

Status update

14/03/2023 23:23:01

Last indexation

31/10/2024 00:30:24

Financing Investment: The Choice Between Bonds and Bank Loans

Contributors

Published in

Publication date

Abstract

Keywords

UNIGE affiliation entities

Citation (ISO format)

Main files (1)

Identifiers

Journal ISSN

Technical informations

Creation

First validation

Update

Status update

Last indexation