For Corporations, Secured Debt Is Out

Secured debt was once the most common type of debt issued by U.S. corporations. But that’s no longer the case. The issuance of secured debt out of all debt has fallen from 98.5 percent in 1900 to just below 5 percent in the early 2000s, according to research from Assistant Professor Nitish Kumar and faculty at Northwestern University and the University of Chicago.

Companies have increasingly turned to unsecured debt instead, in large part because of the increased financial flexibility it provides. The factors that opened the door to this shift in debt issuance include improved accounting reports, disclosure requirements, and changes in company assets.

Read more about this research from Northwestern University’s Kellogg Insight.