TY  - JOUR
AU  - Rauh,Joshua D.
AU  - Sufi,Amir
TI  - Capital Structure and Debt Structure
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14488
PY  - 2008
Y2  - November 2008
UR  - http://www.nber.org/papers/w14488
L1  - http://www.nber.org/papers/w14488.pdf
N1  - Author contact info:
Joshua Rauh
Kellogg School of Management
Northwestern University
2001 Sheridan Road
Evanston, IL 60208
Tel: 847/491-4462
Fax: 847/491-5719
E-Mail: joshua-rauh@kellogg.northwestern.edu

Amir Sufi
University of Chicago
Booth School of Business
5807 South Woodlawn Avenue
Chicago, IL 60637
Tel: 773/702-6148
Fax: 773/702-0458
E-Mail: amir.sufi@chicagobooth.edu
AB  - Using a novel data set that records individual debt issues on the balance sheet of a large random sample of rated public firms, we show that a recognition of debt heterogeneity leads to new insights into the determinants of corporate capital structure. We first demonstrate that traditional capital structure studies that ignore debt heterogeneity miss a substantial fraction of capital structure variation. We then show that relative to high credit quality firms, low credit quality firms are more likely to have a multi-tiered capital structure consisting of both secured bank debt with tight covenants and subordinated non-bank debt with loose covenants. Further, while high credit quality firms enjoy access to a variety of sources of discretionary flexible sources of finance, low credit quality firms rely on tightly monitored secured bank debt for liquidity. We discuss the extent to which these findings are consistent with existing theoretical models of debt structure in which firms simultaneously use multiple debt types to preserve manager and creditor incentives.
ER  -