재무곤경과 기업의 부채선택: 금융위기를 중심으로

Many studies regarding a firm’s capital structure focus on the optimal leverage decision. Considering that debt financing is the predominant source of new external funds, however, it may be more relevant to explore the debt structure than the capital structure. According to previous theoretical studies, the benefits of bank debt financing include alleviation of adverse selection and moral hazard problem through information production and monitoring activities and the efficiency of renegotiation and liquidation in financial distress. The costs of bank debt financing include monitoring costs, suboptimal liquidation problems, softbudget constraint problems, and hold-up problems induced by information monopoly of banks. These theories suggest that a firm considers the tradeoff between the benefits and costs of bank debt financing relative to public debt financing. Allowing for the bank-centered financial system of Korea, this study investigates the debt structure of Korean firms. What are determinants of their debt choice between bank debt and public debt? What are the benefits and costs of bank debt financing? Given that many Korean firms faced financial distress during the financial crisis (1998-2000 period), how financial distress affected their debt choice? In this paper, we examine the association between financial distress and Korean firms’ debt choice by focusing on the financial crisis period. Chemmanur and Fulghieri (1994) show that firms with higher probability of financial distress borrow loans from banks, which have greater reputations for flexibility in dealing with firms in financial distress than public lenders, even though the equilibrium interest rate on bank loan is higher. Diamond (1994) also argues theoretically that the control role of debt determines the debt structure. According to the model, firms that default but have access to viable investment projects choose bank debt over public debt, because banks can restructure out of court the firms. These explanations suggest that our study focusing on the financial crisis period offers us a unique opportunity to empirically test two theoretical models and investigate the effect of financial distress on a firm’s debt choice. We use a sample of 1,250 firm-year observations that consist of Korean firms borrowing their new debt from banks and public lenders during the financial crisis after the IMF bailout. We obtain stock prices and returns data from the Korea Securities Research Institute-Stock Database (KSRI-SD) and financial statements data from the Korea Investors Service-Financial Analysis System (KIS-FAS). Since the data on loan portfolio of banks are not available in Korea, we get the data on new borrowings of firms from the annual reports presented by Data Analysis, Retrieval and Transfer System (DART) of Financial Supervisory Service (FSS). Unlike previous domestic studies examining the proportion of public and private debt in a firm’s existing debt mix, we use an incremental approach by examining new debt issues. Both binary and multinomial logit analyses are used for our empirical model estimation. The main results are as follows. First, inconsistent with Chemmanur and Fulghieri’s prediction, we find that firms with higher coverage ratios are more likely to choose bank debt over public debt. This behavior becomes distinct for firms that place greater reliance on bank debt. This result means that since banks as well as borrowing firms experienced financial difficulties during the financial crisis, firms with close bank relationship assumed the costs of bank debt financing. This suggests that the benefits of bank debt financing are diluted by negative externality of bank relationship, e.g., the reduction of loan size, the avoidance of additional loan, and others. Second, in support of the Diamond’s argument that the control role of debt differs between bank and public debt, we find that the likelihood of choosing bank debt over public debt is higher for firms with lower correlation between cash flows and future investment opportunities. No significant effect of marginal tax rate on debt choice is found. The combined results indicate that if banks are exposed to external shocks such as financial crises, the potential benefits of flexible debt renegotiation that banks can offer firms in financial distress are restricted by the incentives of banks’ reducing their insolvent loans. As a result, our results provide additional empirical evidence on the costs of bank debt financing.