Debt heterogeneity: A study of how different debt instruments affect the performance of publicly listed U.S. firms.

Abstract

Academic literature has previously focused on capital structure as a whole; however, in more recent years, research has revolved around debt structure. Evidence from the last decade have proven the importance of debt structure and that debt specialization has a considerable occurrence among U.S. public firms. By examining corporate loans and bonds for U.S. publicly listed firms from the period of 1996-2019, this paper investigates the relationship between debt heterogeneity and firms’ performance. We find evidence that firms with access to multiple debt instruments will be able to improve their performance by being aware of debt heterogeneity. Our results also show that issuing bonds is favorable, as it generates a higher firm performance. However, market imperfections exclude debt instruments for certain firms, and hence, our findings mainly appeal to firms with unprecedented access to debt heterogeneity.