A Test of the Influence of Bank Loans on Capital Structure in the UK

37 Pages Posted: 14 Jul 2001

See all articles by Abimbola Adedeji

Abimbola Adedeji

University of Birmingham - Birmingham Business School

Date Written: January 2001

Abstract

This study examines the influence of information asymmetry on the degree of reliance on bank loans and the effect of the degree of reliance on bank loans on capital structure in the UK. While the results obtained support the notion that information asymmetry is a major cause of reliance on bank loans, they contradict the US evidence reported by Johnson (1998) which shows that bank loans enhance capital structure. However, the results are consistent with the implication of capital structure theories that the source of debt is not an important part of the capital structure decision. The results also agree with the suggestion of Rajan and Zingales (1995) that there are some differences between the financing practices of firms in the US and the UK.

Suggested Citation

Adedeji, T. Abimbola, A Test of the Influence of Bank Loans on Capital Structure in the UK (January 2001). Available at SSRN: https://ssrn.com/abstract=276711 or http://dx.doi.org/10.2139/ssrn.276711

T. Abimbola Adedeji (Contact Author)

University of Birmingham - Birmingham Business School ( email )

Edgbaston Park Road
Birmingham, B15 2TY
United Kingdom
44-121-414-7296 (Phone)

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