| In the first essay, I empirically investigate whether banks and non-banks deal differently with the information scarcity of their borrowing firms. I analyze loan contracts to informationally opaque small businesses by introducing lender-borrower distance as a proxy for information availability. I provide new evidence consistent with the distinct lending functions of bank and non-bank financial institutions. To shed light on the possible source of observed differences, this paper investigates non-banks' specialization in asset-based lending. Lending capital goods instead of cash appears to be an important explanation for the difference in lending by banks and non-banks.; In the second essay, I investigate the ambiguity in the theoretical predictions for the link between liquidation values and debt availability. I find that, when averaging over all firms, greater liquidation values increase the availability of external financing but that there are cross-industry differences. Particularly in industries where firms must trade their liquid assets (e.g., retail/wholesale), I find no significant relationship between liquidation values and debt availability. More importantly, I find that debt availability does not increase with the liquidation value of a firm's assets when a firm borrows cash (usable at the borrower's discretion) rather than capital goods (untransferable to other types of assets without the lender's endorsement). Overall, the findings here suggest that the relationship between liquidation values and debt availability can be severed when a firm with liquid assets cannot credibly commit against diverting its assets.; In the last essay, I study how liquidation values can affect the determination of debt maturity. I document the first empirical evidence supporting the claim that higher liquidation value can indeed decrease debt maturity. I document that maturity for cash lending, which provides cash usable at the borrower's discretion, decreases with liquidation value of a borrowing firm's total assets. On the other hand, the maturity for capital goods lending, which limits a debtor's ability to transform assets financed, decreases with industry-level market demand for fixed assets. These findings are consistent with the Myers and Rajan (1998)'s prediction that, when liquidation value is high, shortening debt maturity is optimal to avoid asset diversion against the creditors' interest. |
