Motivated by prior research on the informational and monitoring role of product market competition, we examine how competitive pressure affects firms' choice between bank debt and public debt. Using a sample of 3675 U.S. firms over the period 2001–2013, we find that competitive pressure from the product market leads firms to rely less on bank debt financing. In a natural experiment setting, we also find that there is a significant decrease in firm reliance on bank debt after large import tariff reductions. In additional analyses, we show that the effect of competitive pressure on debt choice is more pronounced for firms with greater exposure to competition, higher financial constraints, and weaker governance practices. Moreover, we find that product market competition is associated with long-term maturity debt. Taken together, our study generates the important insight that external governance pressure from the product market acts as an alternate governance mechanism for bank debt monitoring.

We investigate the impact of sovereign wealth fund (SWF) investment on ex ante (implied) cost of equity capital of targeted firms. Using an international sample of 310 targets involved in 403 SWF deals and their matched firms, we find that targeted firms exhibit, on average, higher cost of equity financing than their peers after the announcement date. Firms involved in domestic deals and deals concluded during the Global Financial Crisis exhibit lower implied cost of equity financing, while those involved in cross-border deals are associated with higher implied cost of equity capital.

This study quantifies the effects of persistently low interest rates near to the zero lower bound and unconventional monetary policy on pension fund risk incentives in the United States. Using two structural vector autoregressive (VAR) models and a counterfactual scenario analysis, the results show that monetary policy shocks, as identified by changes in Treasury yields following changes in the central bank's target interest rates, lead to a substantial increase in pension funds’ allocation to equity assets. Notably, the shift from bonds to equity securities is greater during the period where the US Federal Reserve launched unconventional monetary policy measures. Additional findings show a positive correlation between pension fund risk-taking, low interest rates and the decline in Treasury yields across both well-funded and underfunded public pension plans, which is thus consistent with a structural risk-shifting incentive.