This paper investigates whether the source of capital affects a firm's capital structure. The authors find that firms with access to public debt markets (measured by having a debt rating) have significantly higher leverage ratios than firms without such access. Firms with a debt rating have leverage ratios that are 40 percent higher than those without. This difference remains significant even after controlling for firm characteristics and the potential endogeneity of having a debt rating. The authors argue that the source of capital is closely related to a firm's ability to access debt markets, and that firms which are more opaque or have more discretion in their investment opportunities are more likely to borrow from active lenders and are also the type of firms that theory predicts may be constrained. The study also finds that firms with access to public debt markets have longer maturities on their debt, which is consistent with the idea that public debt markets are more expensive and less efficient than private debt markets. The authors conclude that the source of capital does affect a firm's capital structure, and that firms with access to public debt markets are more leveraged than those without.This paper investigates whether the source of capital affects a firm's capital structure. The authors find that firms with access to public debt markets (measured by having a debt rating) have significantly higher leverage ratios than firms without such access. Firms with a debt rating have leverage ratios that are 40 percent higher than those without. This difference remains significant even after controlling for firm characteristics and the potential endogeneity of having a debt rating. The authors argue that the source of capital is closely related to a firm's ability to access debt markets, and that firms which are more opaque or have more discretion in their investment opportunities are more likely to borrow from active lenders and are also the type of firms that theory predicts may be constrained. The study also finds that firms with access to public debt markets have longer maturities on their debt, which is consistent with the idea that public debt markets are more expensive and less efficient than private debt markets. The authors conclude that the source of capital does affect a firm's capital structure, and that firms with access to public debt markets are more leveraged than those without.