Abstract
ABSTRACT Using a dataset on Chinese listed firms, we study the impact of short debt maturity on capital expenditures. In contrast to the empirical findings from most of the previous works that rely on the US firm-level datasets, our results show that firms invest less rather than invest more when they have relatively shorter debt maturity. We argue that in an economy where short-term bank loans are the major financing resource, such as that of China, firms with shorter debt maturity tend to suffer more from potential rollover risks and hence are more likely to reduce their near future capital expenditures. Such an overhang effect generated by short-term debt becomes stronger when firms present worse financial health, as rollover risks are likely to be more serious when firms’ assets-in-place deteriorate.
Published Version
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