Proprietary information and the choice between public and private debt

Kee-Hong BAE, Yunhao DAI, Weiqiang TAN, Wenming WANG

Research output: Contribution to journalArticlespeer-review

Abstract

The high costs of disclosing confidential information lead firms with proprietary information to prefer private debt (bank loan) to public debt (corporate bond). We provide empirical evidence supporting this proposition using the staggered adoption of the inevitable disclosure doctrine (IDD) by US state courts that exogenously increased the value of proprietary information. The focal firms are significantly less likely to issue bonds after the IDD adoption. Financing through public debt decreases more for firms in which the protection of proprietary information is relatively more important. Copyright © 2023 Accounting and Finance Association of Australia and New Zealand.

Original languageEnglish
JournalAccounting & Finance
Early online dateNov 2023
DOIs
Publication statusE-pub ahead of print - Nov 2023

Citation

Bae, K.-H., Dai, Y., Tan, W., & Wang, W. (2023). Proprietary information and the choice between public and private debt. Accounting & Finance. Advance online publication. https://doi.org/10.1111/acfi.13197

Keywords

  • Financing choice
  • Inevitable disclosure doctrine
  • Proprietary information

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