NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Do Firms Care Who Provides their Financing?

Jeffrey K. MacKie-Mason

NBER Working Paper No. 3039
Issued in July 1989
NBER Program(s):   ME

Several types of evidence are presented to demonstrate that firms are concerned with who provides their financing, not just with the debt/equity distinction. Aggregate and industry trends and patterns in the incremental sources of financial capital are documented, and a large sample of incremental corporate financial decisions is econometrically analyzed. There are large and persistent differences in the patterns of internal and external financing, both in the aggregate and across industries. Individual firms are shown to have distinct preferences for different providers of funds. Several indicators of potentially costly hidden information problems are important and significant determinants of choices between private and publicly-marketed sources, even after controlling for the type of security (debt or equity).

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Document Object Identifier (DOI): 10.3386/w3039

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