Collateral and the Choice Between Bank Debt and Public Debt
Management Science · 2016 · Volume 62 · Issue 1
Abstract
This paper tests how collateral value affects a firm’s choice between bank debt and public debt by considering the exogenous variation in the market value of a firm’s real-estate assets caused by fluctuations in local real-estate prices. Using local land supply elasticities as an instrument for local real-estate prices, I estimate that a one-standard-deviation increase in collateral value causes bank debt as a fraction of total debt to increase by six percentage points. This paper was accepted by Wei Jiang, finance .
Keywords
debt structure, collateral, bank debt, bonds, public debt, real estate
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