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Short-Term Debt as Bridge Financing: Evidence from the Commercial Paper Market

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  • MATTHIAS KAHL
  • ANIL SHIVDASANI
  • YIHUI WANG

Abstract

type="main"> We analyze why firms use nonintermediated short-term debt by studying the commercial paper (CP) market. Using a comprehensive database of CP issuers and issuance activity, we show that firms use CP to provide start-up financing for capital investment. Firms’ CP issuance is driven by a desire to minimize transaction costs associated with raising capital for new investment. We show that firms with high rollover risk are less likely to enter the CP market, borrow less CP, and borrow more from bank credit lines. Further, CP is often refinanced with long-term bond issuance to reduce rollover risk.

Suggested Citation

  • Matthias Kahl & Anil Shivdasani & Yihui Wang, 2015. "Short-Term Debt as Bridge Financing: Evidence from the Commercial Paper Market," Journal of Finance, American Finance Association, vol. 70(1), pages 211-255, February.
    • Handle: RePEc:bla:jfinan:v:70:y:2015:i:1:p:211-255
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    File URL: http://hdl.handle.net/10.1111/jofi.12216
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