Browsing by Subject "debt structure"

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  • Newton, David P.; Ongena, Steven; Xie, Ru; Zhao, Binru (2022)
    BOFIT Discussion Papers 5/2022
    Is bank- versus market-based financing different in its attitudes towards Environmental, Social, and Governance (ESG) risk? Using a novel sample covering 3,783 U.S. public firms from 2007 to 2020, we study how firm-level ESG risk affects its financing outcomes. We find that companies with higher ESG risk borrow less from banks than from markets, potentially to avoid bank monitoring and scrutiny. The Social and Governance components, in particular, matter. Furthermore, firms suffering higher numbers of negative ESG reputation shocks are less likely to continue to rely on bank credit in response to lenders' threats to end the lending arrangements. Finally, our results indicate that firms' ESG risk reduces after borrowing from banks but increases after bond issuance, suggesting that banks are more effective than public bond markets in shaping borrowers' ESG performance.
  • Hasan, Iftekhar; John, Kose; Kadiyalad, Padma (2016)
    Bank of Finland Research Discussion Papers 13/2016
    Julkaisun kansilehdellä nimi John Kose muodossa Johnc Kose.
    We augment the LLSV creditor rights index with a new “restructuring index” that measures the incentives provided to creditors to grant concessions outside formal bankruptcy. We study the joint impact of the two indexes on a firm’s leverage policy. We show that the two indexes have at most a statistically weak effect on the level of long-term debt. Instead, the two indexes affect the distribution of long-term debt into bank debt, public debt and private placements. Bank debt increases when the values of both indexes are high. Public debt increases when the creditor rights index is high, but the restructuring index is low, and private placements increase when the restructuring index is high, but the creditor rights index is low. Smaller firms with fewer tangible assets borrow more from banks when both the creditor rights and restructuring indexes are high. When aggregated at the country level, these firm-level results suggest that bankruptcy law can influence the relative importance of credit and equity markets as sources of financing GDP growth.