An Examination into the Impact of Firm Size on Bank Debt Use: A Study With Reference to Corporate Firms across Industries in Pakistan

Abstract

Firm size is considered as the most important and controversial variable in finance literature that determines not only the level of corporate leverage but signals firms’ performance. As creditors are more involved in funding large firms’ operations, how do small firms get their resources from outside financing? At this level, banks resolve the problems of small and medium size firms and provide short term financing to these size categories of firms. Therefore, it is essential to investigate the corporate need and use of bank debt with respect to firm size. The present paper investigates the use of bank debt across different firms’ size. This investigation is conducted using panel data analysis. The results of multiple regressions (OLS) show that there is a significant relationship between the firm specific variables and use of bank debt across firm size.