Firm Size as Determinant of the Nonlinear Relationship Between Bank Debt and Growth Opportunities: The Case of Chilean Public Firms

We analyze the extent to which firm size determines the relationship between growth opportunities and bank debt in the Chilean corporate sector. Using generalized method of moments (GMM) system estimator techniques in an unbalanced panel data of quoted firms, we provide evidence of a U-shaped relati...

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Bibliographic Details
Published in:Emerging markets finance & trade 2014-01, Vol.50 (sup1), p.265-293
Main Authors: Hoffmann, Paolo Saona, Bertín, Mauricio Jara, Warleta, Marta Moreno
Format: Article
Language:English
Subjects:
bank debt
Bank loans
Business growth
Chilean public firms
firm size
Generalized method of moments
growth opportunities
Organizational behavior
Securities markets
Size of enterprise
Studies
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Summary:We analyze the extent to which firm size determines the relationship between growth opportunities and bank debt in the Chilean corporate sector. Using generalized method of moments (GMM) system estimator techniques in an unbalanced panel data of quoted firms, we provide evidence of a U-shaped relationship between growth opportunities and bank debt, which has a different behavior depending on the firm's size. Smaller firms seek private debt sooner than larger firms do when growth opportunities increase. This finding is supported by the institutional characteristics of the Chilean financial system, the higher confidence of small firms in bank debt, and the bank-based orientation of the Chilean financial markets.
ISSN:1540-496X
1558-0938
DOI:10.2753/REE1540-496X5001S117