Investment timing, debt structure, and financing constraints
We examine how debt issuance limits influence the structure of investment, financing, and debt. An increase in debt issuance limits leads to a preference for the issue of market debt over bank debt. Investment strategies are nonmonotonic with respect to debt issuance limits. Debt issuance limits create distortions in the relationship between investment and value. Debt issuance limits lead to debt holders experiencing low risk and low returns.
debt structure finance investment strategies real options debt issuance limit constraints