TY  - JOUR
AU  - Julio,Brandon
AU  - Kim,Woojin
AU  - Weisbach,Michael
TI  - What Determines the Structure of Corporate Debt Issues?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13706
PY  - 2007
Y2  - December 2007
UR  - http://www.nber.org/papers/w13706
L1  - http://www.nber.org/papers/w13706.pdf
N1  - Author contact info:
Brandon Julio
London Business School
Regent's Park
London NW1 4SA
United Kingdom
E-Mail: bjulio@london.edu

Woojin Kim
SNU Business School
Seoul National University
1 Gwanak Ro
Gwanak-gu
Seoul, 151-916
Korea
Tel: +82-2-880-5831
E-Mail: woojinkim@snu.ac.kr

Michael Weisbach
Department of Finance
Fisher College of Business
Ohio State University
2100 Neil Ave.
Columbus, OH  43210
Tel: 614/292-3264
E-Mail: weisbach.2@osu.edu
AB  - Publicly-traded debt securities differ on a number of dimensions, including quality, maturity, seniority, security, and convertibility.  Finance research has provided a number of theories as to why firms should issue debt with different features; yet, there is very little empirical work testing these theories.  We consider a sample of 14,867 debt issues in the U.S. between 1971 and 2004.  Our goal is to test the implications of these theories, and, more generally, to establish a set of stylized facts regarding the circumstances under which firms issue different types of debt.  <br><br>Our results suggest that there are three main types of factors that affect the structure of debt issues:  First, firm-specific factors such as leverage, growth opportunities and cash holdings are related with the convertibility, maturity and security structure of issued bonds.  Second, economy-wide factors, in particular the state of the macroeconomy, affect the quality distribution of securities offered; in particular, during recessions, firms issue fewer poor quality bonds than in good times but similar numbers of high-quality bonds.  Finally, controlling for firm characteristics and economy-wide factors, project specific factors appear to influence the types of securities that are issued.  Consistent with commonly stated 'maturity-matching' arguments, long-term, nonconvertible bonds are more likely to be issued by firms investing in fixed assets, while convertible and short-term bonds are more likely to finance investment in R&D.
ER  -