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Firm Size as Determinant of the Nonlinear Relationship Between Bank Debt and Growth Opportunities: The Case of Chilean Public Firms

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  • Paolo Saona Hoffmann
  • Mauricio Jara Bertín
  • Marta Moreno Warleta

Abstract

We analyze the extent to which firm size determines the relationship between growth opportunities and bank debt in the Chilean corporate sector. Using generalized method of moments (GMM) system estimator techniques in an unbalanced panel data of quoted firms, we provide evidence of a U-shaped relationship between growth opportunities and bank debt, which has a different behavior depending on the firm's size. Smaller firms seek private debt sooner than larger firms do when growth opportunities increase. This finding is supported by the institutional characteristics of the Chilean financial system, the higher confidence of small firms in bank debt, and the bank-based orientation of the Chilean financial markets.

Suggested Citation

  • Paolo Saona Hoffmann & Mauricio Jara Bertín & Marta Moreno Warleta, 2014. "Firm Size as Determinant of the Nonlinear Relationship Between Bank Debt and Growth Opportunities: The Case of Chilean Public Firms," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(1S), pages 265-293, January.
    • Handle: RePEc:mes:emfitr:v:50:y:2014:i:1s:p:265-293
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    Cited by:

    1. Rayenda K. Brahmana & Hui‐Wei You & Evan Lau, 2022. "Does reputation matter for firm risk in developing country?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 2110-2123, April.

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