Debt specialization

This paper examines debt structure using a new and comprehensive database on types of debt employed by publicly listed U.S. firms. We find that specialization in a single debt type, such as capital leases or term loans, is a widespread phenomenon characterizing 85% of the sample, and that the degree of specialization varies widely across different subsamples—large rated firms tend to diversify across multiple debt types, while small unrated firms specialize in fewer types. We suggest several explanations for why debt specialization may take place, and show that firms employing few types of debt have higher bankruptcy costs, are more opaque, and lack access to some segments of the debt markets