Abstract
Debt specialization (DS) has become a wide spread phenomenon among organizations during the recent years, However, the reasons of DS among small and large organizations are yet to be fully known. This paper aims to empirically find whether small and large firms pursue DS strategy for similar reasons or for different one. By using 7 years’ panel data of 419 non-financial companies, the comparative results confirm the existence of DS across organizations. Small companies follow it to reduce expected bankruptcy cost, for economizing information asymmetry, decreasing agency conflicts and due to limited ingress to the debt market. While large companies include few types of debt to reduce operational risk, flotation cost and for building good reputation. We suggest several theoretical justifications for these results. The usage of short term debts is considerably important for all types of organizations irrespective of size.
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