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Firms save from bonds but not from loans

Author

Listed:
  • Colla, Paolo
  • Nagler, Florian

Abstract

We empirically study the corporate propensity to save from bonds versus loans. Our findings indicate that firms save approximately 14 cents of every dollar borrowed through bonds, while they do not exhibit similar savings behavior with loans. Saving from bonds is pervasive over time, and in the cross-section pledgeability is a key driver of this behavior. Specifically, we find that lower asset tangibility and shorter asset maturities are linked to substantial increases in saving rates from bond borrowings. We show that our results align with a model that incorporates external financing frictions and costly default.

Suggested Citation

  • Colla, Paolo & Nagler, Florian, 2025. "Firms save from bonds but not from loans," Journal of Corporate Finance, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:corfin:v:93:y:2025:i:c:s0929119925000495
    DOI: 10.1016/j.jcorpfin.2025.102781
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    More about this item

    Keywords

    Corporate cash savings; Debt structure; Bonds; Loans; Pledgeability;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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