Firms save from bonds but not from loans

We empirically study the corporate propensity to save from bonds versus loans. Our findings indicate that firms save approximately 14 cents of every dollar borrowed through bonds, while they do not exhibit similar savings behavior with loans. Saving from bonds is pervasive over time, and in the cross-section pledgeability is a key driver of this behavior. Specifically, we find that lower asset tangibility and shorter asset maturities are linked to substantial increases in saving rates from bond borrowings. We show that our results align with a model that incorporates external financing frictions and costly default.