Corporate debt issuance and the historical level of interest rates

Using a sample that comprises more than 14,000 new issues of corporate debt for the period 1970-2001, we examine the relation between debt issues and the level of interest rates relative to historical levels. Consistent with recent survey evidence, we find that companies issue more debt, more debt relative to investment spending, and more debt compared to equity when interest rates are low relative to historical rates. The effects continue to hold when we control for other variables that influence debt issuance and when we account for refinancing.