Working Paper: NBER ID: w3039
Authors: Jeffrey K. Mackie-Mason
Abstract: 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).
Keywords: financing; capital structure; asymmetric information
JEL Codes: G32; D82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| type of financing (G32) | financing decisions (G32) |
| source of financing (G32) | financing decisions (G32) |
| asymmetric information problems (D82) | preferences for providers of funds (G23) |
| preferences for providers of funds (G23) | financing choices (G11) |
| type of funds (G23) | preferences for providers of funds (G23) |
| information asymmetries (D82) | financing decisions (G32) |