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Using a rich dataset of public firms in Japan over the 1977 to 2000 time period, we investigate the determinants of initial public offerings (IPOs) of corporate bonds. We find that, consistent with Rajan s (1992) model, close bank-firm ties increase the likelihood of a debt IPO for firms with good growth opportunities. In a post debt IPO analysis, we find that these firms appear to access the public debt market to finance growth opportunities and to reduce their reliance on bank debt, especially main bank debt. We also find that firms are relatively more likely to enter the bond market when asymmetric information problems are less severe.
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