The Determinants of Corporate Debt Financing Strategies

This paper employs an incremental approach to explore the determinants of corporate debt financing strategies such as the factors of the issuing costs, information asymmetry, growth opportunity, credit quality and managerial ownership. Addition to univariate analysis model, we use multiple logit model to detect the affecting factors of three types of corporate debt financing policy. Empirical results show that (1) the issuing costs are not the main concern while firms choosing their debt financing sources; (2) when firms facing higher information asymmetry problems employ more non-bank private debts, and firms with lower information asymmetry problems use more public debts; (3) firms with higher growth opportunities employ more public debts, while firms with lower growth opportunities use more privately placements; (4) higher credit quality firms use more public debts, lower credit quality firms use more non-bank private debts; (5) firms with higher insider ownership use less non-bank private debts.