The Determinants of Corporate Debt Maturity for NSE-Listed Corporates

Abstract

The maturity structure of corporate debt is one of the significant financing choices that a firm must make simultaneously while deciding how to finance its operational and investment decisions. Even though the capital structure is one of the scrutinized topics of interest in the area of corporate finance literature, there are scarce studies investigating corporate debt maturity—even less so in the context of emerging markets. The choice of a suitable debt maturity structure is extremely relevant for firms as it can enable them to avoid mismatch by aligning assets in line with liabilities, address agency related problems, sidestep the ill effects of cost of capital and signal about the firms’ earning quality and value. The study investigates the firm-specific and macroeconomic determinants that are significant for a debt maturity structure of Indian corporate firms. A sample of 29 non-financial firms listed on the National Stock Exchange during the period 2008–2016 was taken to test the hypothesis. Employing fixed effects panel data analysis, the study provides an empirical evidence that firm size, liquidity, asset maturity and base rate have significant effects on debt maturity choice in the Indian context, whereas tax effects, growth rate, firm quality and wholesale price index are not significantly related to the debt maturity structure. JEL Classification: C23, G20, G32