Abstract
AbstractHow do fluctuations in aggregate credit supply impact debt structure? In order to capture credit supply, I use six proxies to gauge how debt structure changes under different lending conditions. My results show that periods of expansionary credit are associated with debt concentration, a decrease in the number of bank loan lenders, an increase in the probability of repeat lenders, and an increase in the probability of repeat lead arrangers for firms. However, I argue that this phenomenon is dependent on the riskiness of the firm. Better quality firms choose to concentrate debt structure when supply is abundant whereas low‐quality firms may have little or no choice. I hypothesize that firms concentrate debt structure as a way to enhance negotiating leverage over creditors and increase the value of their strategic default option.
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