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What determines outstanding corporate debt mix? Evidence from fractional multinomial logit estimation

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  • Kenneth Khang
  • Tao-Hsien Dolly King
  • Hung Nguyen

Abstract

This study employs the fractional multinomial logit setting proposed by Papke and Wooldridge (1996) to examine factors driving the choice among nonbank private (144A) debt, bank loans and public debt made by 988 nonfinancial firms during 1993-2007. We document that the majority of firm-level factors have persistent effects on corporate outstanding debt mix across economic conditions. We also highlight the importance of macroeconomic variables on firms' borrowing decisions as predicted by Diamond (1991). Finally, we document a substitution effect among debt financing sources due to credit rating downgrades, which is inconsistent with Rauh and Sufi (2010).

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  • Kenneth Khang & Tao-Hsien Dolly King & Hung Nguyen, 2016. "What determines outstanding corporate debt mix? Evidence from fractional multinomial logit estimation," Applied Economics, Taylor & Francis Journals, vol. 48(4), pages 276-291, January.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:4:p:276-291
    DOI: 10.1080/00036846.2015.1078445
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    Cited by:

    1. Wang, Chih-Wei & Chiu, Wan-Chien & King, Tao-Hsien Dolly, 2020. "Debt maturity and the cost of bank loans," Journal of Banking & Finance, Elsevier, vol. 112(C).

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