The Choice between Project Financing and Corporate Financing : Evidence from the Corporate Syndicated Loan Market

We examine the factors that influence public firms' choice between project financing and corporate financing. Using a sample of 15,191 syndicated deals closed between 2000 and 2016, we find that economies of scale, agency costs of debt, and information asymmetry arguments affect the choice of on- versus off-balance-sheet funding. However, our analysis does not provide evidence supporting project finance as a mechanism to reduce sponsors' cost of borrowing: project finance deals' weighted average spread is equal to or higher than that of comparable corporate financing deals and sponsors' creditworthiness does not deteriorate when compared to a sample of matched firms