TY  - JOUR
AU  - Erel,Isil
AU  - Julio,Brandon
AU  - Kim,Woojin
AU  - Weisbach,Michael
TI  - Market Conditions and the Structure of Securities
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14952
PY  - 2009
Y2  - May 2009
UR  - http://www.nber.org/papers/w14952
L1  - http://www.nber.org/papers/w14952.pdf
N1  - Author contact info:
Isil Erel
Department of Finance
Ohio State University
832 Fisher Hall
2100 Neil Avenue
Columbus, OH 43210
Tel: 614-292-5174
E-Mail: erel@fisher.osu.edu

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  - Economic theory, as well as commonly-stated views of practitioners, suggests that market downturns can affect both the ability and manner in which firms raise external financing.  Theory suggests that downturns should be associated with a shift toward less information-sensitive securities, as well as a "flight to quality", in which firms can issue high-rated securities but not low-rated ones.  We evaluate these hypotheses on a large sample of publicly-traded debt issues, seasoned equity offers, and bank loans. We find that market downturns lead firms to use less information-sensitive securities. In addition, poor market conditions affect the structure of securities offered, shifting them towards shorter maturities and more security. Furthermore, market conditions affect the quality of securities offered, with worsening conditions substantially lowering the number of low-rated debt issues.  Overall, these findings suggest that market-wide conditions are important factors in firms' capital raising decisions.
ER  -