Debt Composition, Institutional Demand, and Corporate Investment: Evidence from Thailand

This paper examines how Thai firms utilize capital market debt – specifically, commercial papers (CPs) and bonds – to manage leverage, liquidity, and investment. Using a firm-quarter panel from 2001 to 2024, we find that firms with more diversified debt structures maintain higher leverage and invest more, consistent with financial flexibility theories. CP issuance is positively associated with both capital expenditures and working capital growth; firms adjust issuance dynamically in response to their liquidity needs. Notably, CPs are not merely used as bridge instruments but as a strategic financing tool. We further demonstrate that mutual fund holdings of CP, particularly by money market funds, are associated with higher firm-level investment. These findings highlight the role of non-bank financial intermediaries in facilitating access to credit, suggesting that monetary policy transmission increasingly depends on how liquidity is intermediated through capital markets.