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Bank Loan Supply, Lender Choice, and Corporate Capital Structure

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  • MARK T. LEARY

Abstract

This paper explores the relevance of capital market supply frictions for corporate capital structure decisions. To identify this relationship, I study the effect on firms' financial structures of two changes in bank funding constraints: the 1961 emergence of the market for certificates of deposit, and the 1966 Credit Crunch. Following an expansion (contraction) in the availability of bank loans, leverage ratios of bank‐dependent firms significantly increase (decrease) relative to firms with bond market access. Concurrent changes in the composition of financing sources lend further support to the role of credit supply and debt market segmentation in capital structure choice.

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  • Mark T. Leary, 2009. "Bank Loan Supply, Lender Choice, and Corporate Capital Structure," Journal of Finance, American Finance Association, vol. 64(3), pages 1143-1185, June.
  • Handle: RePEc:bla:jfinan:v:64:y:2009:i:3:p:1143-1185
    DOI: 10.1111/j.1540-6261.2009.01461.x
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