The Choice Among The Spot Bank Loan, Commitment Loan And The Publicly Traded Debt

This paper first examines the effect of the investors' information exploitability. We show that if the exploitability is too low, the investors can't attenuate the firms' moral hazard effectively. And we also show that if the share of rents lost is too high, the firms will prefer to make loans with loan commitments. But due to the liquidity cost, the interest rate on commitment loans is high relative to spot credit loans and debt market loans. We also find that the availability of the loans in the market determines the firms' choice between the spot credit market and the debt market. The firms will make loans in the market with higher probability of getting loans.