Intangible Assets and Unsecured Debt

This study investigates the impact of intangible assets on the priority structure of corporate debt for U.S. firms. We document a positive relationship between intangible assets and unsecured debt. This finding is robust to possible endogeneity concerns and holds up to a battery of robustness checks. We further explore the underlying mechanisms and find strong evidence that the positive relationship between intangible assets and unsecured debt could be attributed to firms' demand to preserve collateral capacity and maintain financial and/or operational flexibility. We also document that intangible assets improve the credit quality of firms. The results collectively indicate the importance of intangible assets on firms' debt financing decisions.