Bank Finance Versus Bond Finance
We present a dynamic general equilibrium model with agency costs where: i) firms are heterogeneous in the risk of default; ii) they can choose to raise finance through bank loans or corporate bonds; and iii) banks are more efficient than the market in resolving informational problems. The model is used to analyze some major long-run differences in corporate finance between the US and the euro area. We suggest an explanation of those differences based on information availability. Our model replicates the data when the euro area is characterized by limited availability of public information about corporate credit risk relative to the US, and when european firms value more than US firms the flexibility and information acquisition role provided by banks.
|Date of creation:||Apr 2011|
|Date of revision:|
|Publication status:||published as Fiorella De Fiore & Harald Uhlig, 2011. "Bank Finance versus Bond Finance," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(7), pages 1399-1421, October.|
|Note:||EFG CF ME|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bartram, Sohnke M. & Brown, Gregory & Stulz, Rene M., 2009.
"Why Do Foreign Firms Have Less Idiosyncratic Risk Than U.S. Firms?,"
Working Paper Series
2009-5, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
- Söhnke M. Bartram & Gregory Brown & René M. Stulz, 2009. "Why Do Foreign Firms Have Less Idiosyncratic Risk than U.S. Firms?," NBER Working Papers 14931, National Bureau of Economic Research, Inc.
- Mitchell Berlin & Loretta J. Mester, 1990.
"Debt covenants and renegotiation,"
90-21, Federal Reserve Bank of Philadelphia.
- Gilchrist, Simon & Yankov, Vladimir & Zakrajsek, Egon, 2009.
"Credit market shocks and economic fluctuations: Evidence from corporate bond and stock markets,"
Journal of Monetary Economics,
Elsevier, vol. 56(4), pages 471-493, May.
- Vladimir Yankov & Egon Zakrajsek & Simon Gilchrist, 2009. "Credit Market Shocks and Economic Fluctuations: Evidence from Corporate Bond and Stock Markets," 2009 Meeting Papers 514, Society for Economic Dynamics.
- Simon Gilchrist & Vladimir Yankov & Egon Zakrajsek, 2009. "Credit Market Shocks and Economic Fluctuations: Evidence from Corporate Bond and Stock Markets," NBER Working Papers 14863, National Bureau of Economic Research, Inc.
- Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998.
"The Financial Accelerator in a Quantitative Business Cycle Framework,"
NBER Working Papers
6455, National Bureau of Economic Research, Inc.
- Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
- Bernanke, B. & Gertler, M. & Gilchrist, S., 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," Working Papers 98-03, C.V. Starr Center for Applied Economics, New York University.
- Chemmanur, T.J. & Fulghieri, P., 1992.
"Reputation, Renegotiation, and the Choice Between Bank Loans and Publicity Traded Debt,"
92-24, Columbia - Graduate School of Business.
- Chemmanur, Thomas J & Fulghieri, Paolo, 1994. "Reputation, Renegotiation, and the Choice between Bank Loans and Publicly Traded Debt," Review of Financial Studies, Society for Financial Studies, vol. 7(3), pages 475-506.
- Carlstrom, Charles T & Fuerst, Timothy S, 1997.
"Agency Costs, Net Worth, and Business Fluctuations: A Computable General Equilibrium Analysis,"
American Economic Review,
American Economic Association, vol. 87(5), pages 893-910, December.
- Ryo Kato, 2002. "Matlab code for the Carlstrom-Fuerst AER (1997) model," QM&RBC Codes 112, Quantitative Macroeconomics & Real Business Cycles.
- Charles T. Carlstrom & Timothy S. Fuerst, 1996. "Agency costs, net worth, and business fluctuations: a computable general equilibrium analysis," Working Paper 9602, Federal Reserve Bank of Cleveland.
- Denis, David J. & Mihov, Vassil T., 2003. "The choice among bank debt, non-bank private debt, and public debt: evidence from new corporate borrowings," Journal of Financial Economics, Elsevier, vol. 70(1), pages 3-28, October.
- Emery, Kenneth M. & Cantor, Richard, 2005. "Relative default rates on corporate loans and bonds," Journal of Banking & Finance, Elsevier, vol. 29(6), pages 1575-1584, June.
- Timothy S. Fuerst & Charles T. Carlstrom, 1998. "Agency costs and business cycles," Economic Theory, Springer, vol. 12(3), pages 583-597.
- Oliver E. Williamson, 2002. "The Theory of the Firm as Governance Structure: From Choice to Contract," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 171-195, Summer.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:16979. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.