Aggregate credit supply and debt structure

How do fluctuations in aggregate credit supply impact debt structure? In order to capture credit supply, I use six proxies to gauge how debt structure changes under different lending conditions. My results show that periods of expansionary credit are associated with debt concentration, a decrease in the number of bank loan lenders, an increase in the probability of repeat lenders, and an increase in the probability of repeat lead arrangers for firms. However, I argue that this phenomenon is dependent on the riskiness of the firm. Better quality firms choose to concentrate debt structure when supply is abundant whereas low-quality firms may have little or no choice. I hypothesize that firms concentrate debt structure as a way to enhance negotiating leverage over creditors and increase the value of their strategic default option.