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Bank debt and market debt: an empirical analysis for Spanish firms

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  • Casasola, María José
  • Tribo Gine, José Antonio

Abstract

This paper examines the effect on the firm's banking cost of the issue of debt securities. We argue over the existence of a positive relationship between the issue of market debt and the reduction of firm's banking cost. This idea relies on three main arguments: i) Banks can delegate to investors the supervision task, a feature that makes bank supervision less costly. ii) The issue of public debt increases firms' bargaining power in front of the banks, as the former can get funds through non-bank financing ch annels. iii) Banks with no prior information on the issuing firm may interpret the issue of debt securities as a positive signal of firm's quality. Additionally, we argue that the previous effects are less important for non-first issues and are sensible to the maturity of the bond issued. We empirically test these and other related theoretical results making use of a database of Spanish non-financial firms during the 1993-1998 period. We find empirical support for our theoretical contentions.

Suggested Citation

  • Casasola, María José & Tribo Gine, José Antonio, 2002. "Bank debt and market debt: an empirical analysis for Spanish firms," DEE - Working Papers. Business Economics. WB wb020702, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
  • Handle: RePEc:cte:wbrepe:wb020702
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    References listed on IDEAS

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    Cited by:

    1. Pablo de Andrés Alonso & Félix J. López Iturriaga & Juan A. Rodríguez Sanz & Eleuterio Vallelado González, 2005. "Determinants of Bank Debt in a Continental Financial System: Evidence from Spanish Companies," The Financial Review, Eastern Finance Association, vol. 40(3), pages 305-333, August.

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