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Management Science Vol. 62 No. 1 2016

Collateral and the Choice Between Bank Debt and Public Debt

Leming Lin

Katz Graduate School of Business, University of Pittsburgh, Pittsburgh, Pennsylvania 15260

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.

DOI
10.1287/mnsc.2014.2094
Volume
62
Issue
1
Pages
111-127
Language
en
Sources
openalex bibtex:phds-export.bib crossref

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