| Abstract: | Relative to bond financing, there is a significant and temporary increase in the use of loan financing by less developed countries as oil crises occurred. We argue that bank loan syndication reschedules debt more efficiently and better serves balance of payments financing than bondholders. This explanation is consistent with the line of argument that banks are unique. In addition, the low-income countries' loan financing increased more than that of the middle-income countries during the oil-crises, which is compatible with the notion that the contracting cost is cheaper with loan financing than with bond financing. |
