Determinants of corporate borrowing

Determinants of Corporate Borrowing

Determinants of corporate borrowing: A behavioral perspective

Article history: Received 22 December 2008 Received in revised 4 February 2009 Accepted 6 February 2009 Available online 20 February 2009 This article integrates an earnings-based capital structure model into a simple real options framework to analyze the effects of managerial optimism and overconfidence on the interaction between financing and investment decisions. Several empirical implicatio...

Anatomy of Corporate Borrowing Constraints∗

A common perspective in macro-finance analyses links firms’ borrowing constraints to the liquidation value of physical assets firms pledge as collateral. We empirically investigate borrowing by non-financial firms in the US. We find that 20% of corporate debt by value is collateralized by specific physical assets (“asset-based lending” in creditor parlance), while 80% is based predominantly on ...

Tax Policy and Corporate Borrowing

Aggregate statistics readily indicate why so many observers of financial markets in the United States are concerned about the balance between debt and equity in the corporate financial decision. Exceeding zero in most years before 1984, net equity issues by U.S. nonfinancial corporations have been negative in each year since. Net redemptions averaged approximately $80 billion annually during th...

Internet Appendix: Anatomy of Corporate Borrowing Constraints

As mentioned in Section 2.1.2, other types of financial covenants have two main forms. One type specifies an upper bound on book leverage, or analogously a lower bound on book equity (book net worth). As book equity is closely related to the accumulation of past earnings, this can be broadly viewed as a variant of EBCs. The popularity of this type of covenant has declined in the past twenty yea...