THE BORROWER CHARACTERISTICS IN HOT EQUITY MARKETS
In this study, I examine the characteristics of U.S. corporate borrowers (public debt, private placement, and syndicated loan firms) in HOT versus COLD equity markets. My main objective is to see the characteristics of firms that choose debt financing even when the equity market is HOT. HOT equity...
Main Author: | |
---|---|
Format: | Article |
Language: | English |
Published: |
Academica Brâncuşi
2017-06-01
|
Series: | Analele Universităţii Constantin Brâncuşi din Târgu Jiu : Seria Economie |
Subjects: | |
Online Access: | http://www.utgjiu.ro/revista/ec/pdf/2017-03/04_HALIL%20DINCER%20KAYA.pdf |
Summary: | In this study, I examine the characteristics of U.S. corporate borrowers (public debt, private placement, and
syndicated loan firms) in HOT versus COLD equity markets. My main objective is to see the characteristics of firms
that choose debt financing even when the equity market is HOT. HOT equity markets are defined as the top twenty
percent of the months in terms of the de-trended number of equity offerings. I find that the HOT equity market
borrowers generally have higher market-to-book ratios compared to the COLD market borrowers. Also, in HOT equity
markets, the public debt firms (i.e. the corporate bond issuers) tend to have fewer tangible assets, the private placement
firms tend to be smaller and highly levered, and the syndicated loan firms tend to be smaller, more profitable, and less
levered compared to the COLD market firms. When I look at the number of transactions in each market, I find that
when the equity market is active (i.e. HOT), the syndicated loan market is even more active. During these periods, the
public debt market is also active (although not as much as the equity or the syndicated loan markets). When I look at
the sizes of the transactions in each market, I find that the private placements tend to be significantly larger in HOT
markets compared to COLD markets. I conclude that while the equity, the public debt, and the syndicated loan markets
move together in terms of market activity, the equity market and the private placement markets move together in terms
of the size of the transaction.
|
---|---|
ISSN: | 1844-7007 1844-7007 |