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What can be said about a firm having access to the debt markets?

What can be said about a firm having access to the debt markets?

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Answer #1

Access to debt markets is a sign of highly efficient and effective market for a firm. As Debt provides benefit like taxation and higher returns to equity holders in the event of good times, the market extends the flexibility for capital structure decisions for a firm. Bank loans alone do not provide an efficient market as it is not traded. A traded debt capital market provides efficient price discovery which could aid the firm in lowering the cost of capital and thereby increasing its valuation, subsequently making it attractive for the equity investors.

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