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Recent studies on the use of private, non-bank, debt have given conflicting results. Instead of a fixed order of preference between various choices of debt as suggested by previous studies, this study postulates that there is a life cycle of debt choice, and as firms move through the cycle, their preferences change. For stable, mature firms, when given a choice, non-bank private debt would fall in between the two extremes of bank debt and public debt. We provide empirical as well as anecdotal evidence from the trade press to support this view. We jointly model the decision to choose a debt source as well as the amount of debt on data from a current database to focus on the “intentional” change in debt levels, rather than those due to unintentional changes. We find that there are significant interdependencies between the decision to borrow from a particular source, as well as the amount of loan, and that taxes, as well as lender reputation, degree of renegotiability and financial flexibility required by the borrower, are key factors that influence the choice of private debt source.

We examine the maturity structure in private placements of debt and relate it to contracting, signaling, tax, and liquidity risk considerations for firms. We find that firms with higher tax rates issue private placements of debt with longer maturities, consistent with the tax hypothesis. However, our results do not support the contracting, signaling, and liquidity risk hypotheses. In addition, the results are confined to the smaller firms in the sample, firms without a public debt rating, and debt issues not pursuant to Rule 144A. The evidence is consistent with smaller firms issuing private placements of debt to avoid monopoly rent extraction from banks.

Before the pandemic, World’s public debt was considered excessive, mainly by the standards set by the IMF, the European Union and the euro zone. Today, with the pandemic COVID-19, the world economy is facing an economic crisis that only the public authorities can contain, at least in the short term. In France, the Arthuis Commission is proposing to control public debt and return to debt reduction by the end of this decade. However, the economic stakes go beyond the crisis caused by the pandemic. It is also a question of preparing a different society, one that is less unequal and capable of engaging in sustainable economic development in the face of global warming. The concern is more about the excesses of international financial speculation, growing social inequalities and living conditions on Earth, which threaten the economic and social future of new generations much more than public debt.

As students increasingly incur debt to finance their undergraduate education, there is heightened concern about the long-term implications of loans on borrowers, especially borrowers from low socioeconomic backgrounds. Drawing upon the concepts of cultural capital and habitus (Bourdieu & Passeron, 1977), this research explores how student debt and social class intersect and affect individuals’ trajectory into adulthood. Based on 50 interviews with young adults who incurred $30,000–180,000 in undergraduate debt and who were from varying social classes, the findings are presented in terms of a categorization schema (income level by level of cultural capital) and a conceptual model of borrowing. The results illustrate the inequitable payoff that college and debt can have for borrowers with varying levels of cultural resources, with borrowers from low-income, low cultural capital backgrounds more likely to struggle throughout and after college with their loans.

This study analyses the threshold for debt of corporations under the debt-bias corporate tax system. We adopt a contingent claim model of the corporation to reflect the incentive effect of the debt-bias corporate tax system. This framework is based on aspiration level theory and the required probability for the successful completion of a project that is identical to decision weight probability in prospect theory. The proposed framework incorporates the debt-bias tax regulations prevailing in Organization for Economic Co-operation and Development (OECD) countries. When the OECD countries’ financial and non-financial corporation data were applied into framework, we observe that the government achieve equilibrium by employing contradictory corporate tax regulations. Moreover, we observe that corporations are intrinsically equity-loving, although the debt-bias corporate tax system stimulates corporations toward debt. This situation makes the government corporate revenue sensitive by placing it at the disposal of corporations’ financing choice instead of corporate profitability. The corporations’ threshold for debt assists in distinguishing between debt and equity-loving corporations. Moreover, corporations’ threshold for debt assists policy makers in deciding the appropriate combination of such reform policies as the Allowance on Corporate Equity and Comprehensive Business Income Tax. A transition from debt-oriented capital structure to equity-oriented capital structure may play an important role in promoting Islamic finance.

The purpose of this study is twofold. First, to investigate whether internal attributes of corporate governance such as board size, board composition, CEO duality, board meetings, blockholders' ownership, managerial ownership, CEO remuneration, and directors' remuneration affect the capital structure (i.e., total debt ratio, long-term debt ratio, and short-term debt ratio) choice of non-financial firms listed on Pakistan Stock Exchange Limited during 2009–2014. Second, whether theories relevant to corporate governance developed in western settings provide support to understand the financing behavior of firms in a developing country, Pakistan. In sum, results indicate that corporate governance measures have some role in shaping the financing behavior of firms. It is worth mention that each company is bound to explicitly confirm in annual report regarding compliance with code of corporate governance, but results indicate a different story. For instance, descriptive statistics indicate that five individual larger shareholders on average hold more than 68% shares.

Take the image of the entrepreneur as a driven accepter of risk, an individual (or set of individuals) hungry to amass a fortune as quickly as possible. This image is consistent with the traditional finance theory view of entrepreneurial startups, one that assumes that profit maximization is the firm’s sole motivation (Chaganti, DeCarolis & Deeds, 1995). Myers’s (1994) cost explanation of the pecking order hypothesis (i.e. entrepreneurs prefer internally generated funds first, debt next, and external equity last) incorporates this economically rational view of entrepreneurs’ financing preferences. According to this view, information asymmetry and uncertainty make the availability of external financing very limited and the cost of it prohibitively high. To compensate, entrepreneurs must give up greater and greater control in order to “buy” funds needed to achieve the desired growth and profitability. Indeed, Brophy and Shulman (1992, p. 65) state, “Those entrepreneurs willing to relinquish absolute independence in order to maximize expected shareholder wealth through corporate growth are deemed rational investors in the finance literature.” Undoubtedly, cost and availability explanations of financing choices are valid for many new and small businesses. However, many entrepreneurship researchers have long been dissatisfied with the incompleteness of this perspective.

I study the determinants of conventional leverage in a sample of publicly listed corporations based in Saudi Arabia, United Arab Emirates, and Qatar, for a period spanning from 2005 up to end of 2014, and investigate whether those determinants can also explain the utilization of Sukuk by the same corporations in their capital structures. Evidence related to the determinants of conventional leverage is consistent with results from prior studies conducted on corporations based in developed and developing countries. Firm’s size, profitability, tangibility, age, and tendency to pay dividends are significant determinants of conventional leverage. However, not all those factors significantly explain the utilization of Sukuk as a financing vehicle. The size of the firm remains to be the most significant factor, in addition to the conformance of those corporations with respect to Shari’a principles measured by their utilization of other Islamic investments and financing instruments. Overall, I conclude that models used to predict conventional leverage are not capable of fully explaining the determinants of Sukuk issuances.

This chapter contributes to the growing global VAR (GVAR) literature by showing how global and national shocks can be identified within a GVAR framework. The usefulness of the proposed approach is illustrated in an application to the analysis of the interactions between public debt and real output growth in a multicountry setting, and the results are compared to those obtained from standard single country VAR analysis. We find that on average (across countries) global shocks explain about one-third of the long-horizon forecast error variance of output growth, and about one-fifth of the long-run variance of the rate of change of debt-to-GDP. Evidence on the degree of cross-sectional dependence in these variables and their innovations are exploited to identify the global shocks, and priors are used to identify the national shocks within a Bayesian framework. It is found that posterior median debt elasticity with respect to output is much larger when the rise in output is due to a fiscal policy shock, as compared to when the rise in output is due to a positive technology shock. The cross-country average of the median debt elasticity is 1.45 when the rise in output is due to a fiscal expansion as compared to 0.76 when the rise in output follows from a favorable output shock.