Corporate Debt Maturity Research Articles

Time-varying managerial overconfidence and corporate debt maturity structure

ABSTRACTWe examine the impact of managerial overconfidence on corporate debt maturity. We build upon the argument that managerial overconfidence is likely to mitigate the underinvestment problem, which is often the major concern for long-term debt investors. Within this context, we hypothesise that managerial overconfidence increases debt maturity. Our empirical evidence, based on time-varying measures of overconfidence derived from computational linguistic analysis and directors’ dealings in their own companies’ shares, supports this hypothesis. Specifically, we find that the changes in both first person singular pronouns and optimistic tone are positively related to the change in debt maturity. Moreover, we find that the insider trading-based overconfidence of CEO, who is most likely to influence investment decision and thus the underinvestment problem, has a stronger impact on debt maturity than the overconfidence of other directors (e.g. CFO). Overall, our study provides initial evidence for a positive overconfidence-debt maturity relation via overconfidence mitigating the agency cost of long-term debt.

Corporate Pensions and the Maturity Structure of Debt

In this paper, we investigate the role of pension obligations, the most significant off-balance-sheet item, in determining corporate debt maturity and spreads. We begin by showing a significant and robust positive relationship between pension liabilities and corporate short-term debt ratio. We also find that more pension obligations cause a significant increase in the cost of debt, but this effect is mitigated by short-maturity debt. Overall, our study shows that short-term debt can reduce asymmetric information costs related to pensions.

PENGARUH GOOD CORPORATE GOVERNANCE DAN DEBT MATURITY TERHADAP PREDIKSI BOND RATING

The objective of this study is examine the effect of good corporate governance and debt maturity towards bond rating prediction. Good corporate governance is proxied by institutional ownership, managerial ownership, board size, independent directors, audit committee, and audit quality. The sample in this study consist of 229 bonds issued by financial companies listed on the Indonesia Stock Exchange from 2011 to 2013 and was ranked by PT PEFINDO. This study uses ordinal regression analysis model to test the effect of good corporate governance and debt maturity towards bond rating prediction. The results of this study showed that institutional ownership and audit committee have significant positive effect towards bond rating prediction while independent commissioner have significant negative effect towards bond rating prediction. Managerial ownership, board size, audit quality and maturity haven’t significantly affect toward bond ratings. The findings of this study indicated that companies with the bigger institutional ownership and the bigger audit committees, then predicted the company has bonds with higher ratings. The findings that the independent commissioner has significant negative effect toward bond rating prediction indicate that the presence of independent commissioner haven’t been able to role effectively so expected the quality of independent commissioner should be improved.

The Relationship between Corporate and Government Debt Maturity in Europe

Focusing on the European case, in this paper we investigate the “gap-filling” explanation for corporate debt maturity choices in a multi-country setting. We argue and demonstrate empirically that companies adjust their debt maturity in response to supply shocks in the share of long-term government debt occurring both at home as well as in other European countries as a whole. Consistent with expectations, the latter association is stronger in particular for smaller countries and since the introduction of the Economic and Monetary Union (EMU). The magnitude of the moderating role of size for the EMU sub-sample is fully consistent with our prediction for countries with a common currency and monetary policy. Our results have relevant implications for the ability of individual European governments to use their debt maturity structure as a policy tool.

The effect of franchising on debt maturity in the US restaurant industry

With franchising as an efficient means of growth and expansion, this study aims to explore how franchising can influence corporate debt maturity structure in the US restaurant industry. The purpose of this study is to investigate (1) the effect of franchising on debt maturity structure, (2) the relationship between leverage and short-term debt, and (3) the moderating effect of franchising on the relationship between short debt maturity and leverage in the US restaurant industry. Analyzing panel data on publicly traded US restaurant firms, this study showed that franchising could be an important determinant of the maturity structure of corporate debt. Empirical evidence suggests that restaurant firms pursuing growth and expansion through franchising should take into consideration the effect of franchising on the debt maturity structure when making capital structure decisions.

CEO inside debt and corporate debt maturity structure

Abstract This paper examines the relation between chief executive officer (CEO) inside debt holdings and corporate debt maturity. We provide robust evidence that inside debt has a positive effect on short-maturity debt and that this effect is concentrated in financially unconstrained firms that face lower refinancing risk. Our analysis further shows that CEO inside debt helps reduce the cost of debt financing. Overall, our results indicate that managerial holdings of inside debt facilitate access to external debt financing and reduce refinancing risk, thus incentivizing managers to use less costly shorter term debt.

경영자소유지분이 부채만기와 대리인비용에 미치는 영향

경영자소유지분이 부채만기와 대리인비용에 미치는 영향

Corporate Debt Maturity and Future Firm Performance Volatility

Corporate Debt Maturity and Future Firm Performance Volatility

Labor protection and corporate Debt maturity: International evidence

This paper investigates the impact of labor protection on corporate debt maturity structure. We hypothesize that stronger labor protection is conducive to a greater use of short-term debt maturity by firms. Using various country-level indicators as measures of labor protection, and a sample of 114,594 firm-years from 43 countries over the 1990–2010 period, we document robust evidence that firms located in countries where labor enjoys a strong protection tend to borrow more short-term. Our analysis suggests that labor protection is an important institutional factor that plays a role in determining the maturity structure of corporate debt over-and-above economic, legal, and political factors identified in prior research.

The Long and the Short of Corporate Debt Maturity: Optimal Term Structure with Independent Creditors

The Long and the Short of Corporate Debt Maturity: Optimal Term Structure with Independent Creditors

Online Appendix to Corporate Debt Maturity Profiles

This document contains the Online Appendix for the paper Corporate Debt Maturity Profiles. The paper to which these Appendices apply is available at the following URL: http://ssrn.com/abstract=1966613.

Does Managerial Emotional Biases Affect Debt Maturity Preference? Bayesian Network Method: Evidence from Tunisia

This study documents that managerial characteristics’ play an important role in determining corporate debt maturity. Specifically, we focus on the relationship between the managerial biases and firm debt maturity preference. Empirical analysis of the relationship between emotional bias and debt maturity using Bayesian Network Method. We distributed a questionnaire among 100 Tunisian managers to measure their emotional biases. Our results have revealed that the behavioral analysis of debt maturity preference implies leader affected by behavioral biases (optimism, loss aversion, and overconfidence) presence prefer long term debt maturity allowing this protect against the takeover operation Russianness.

CEO overconfidence and corporate debt maturity

This paper extends our knowledge of corporate debt maturity structure by examining whether and to what extent overconfident CEOs affect maturity decisions. Consistent with a demand side story, we find that firms with overconfident CEOs tend to adopt a shorter debt maturity structure by using a higher proportion of short-term debt (due within 12months). This behavior of overconfident CEOs is not deterred by the high liquidity risk associated with such a financing strategy. Our demand side explanation remains robust even after considering six possible alternative drivers including a competing supply side explanation (in which creditors are reluctant to extend long-term debt to overconfident CEOs).

Corporate debt maturity in the MENA region: Does institutional quality matter?

We investigate corporate debt maturity structure in the MENA region and its firm and institutional determinants using a sample of 444 listed firms over the 2003–2011 period, or 3717 firm-year observations. We find a very limited use of long-term debt by MENA firms; long-term debt represents only 3.41% of the typical MENA firm's total debt, which is much less than what is reported in prior literature on other parts of the world. Consistent with the predictions of debt maturity theories and prior empirical findings, we find that leverage, firm size, and asset tangibility are positively associated with the use of more long-term debt while firms facing a higher risk of default tend to use more short-term debt. In addition, we find that better quality institutions lead to the use of more long-term debt in MENA. Specifically, stronger rule of law, better regulatory effectiveness, better legal protection of creditors, and more developed financial intermediaries are associated with greater use of long-term borrowing by MENA firms. Our findings have important policy implications as they illuminate the path toward needed reforms that would enhance MENA firms' access to long-term debt, which may ultimately result in more private investment and jobs.

Corporate Debt Maturity and Acquisition Decisions

This paper provides an empirical analysis of the effects of corporate debt maturity on firms’ acquisition decisions using a large sample of acquisitions from 1991 to 2010. We find that firms with shorter debt maturity are less likely to undertake acquisitions. If they do, they are more likely to undertake smaller deals, take more time to complete, are less likely to make all cash offers, and tend to use less cash in the payment. These results support the predictions of the increased liquidity risk hypothesis. We also find that acquirers with shorter debt maturity realize higher announcement returns and experience better long‐term stock returns and operating performance. These results suggest that short debt maturity improves the efficiency of capital allocation through acquisition decisions.

The financial crisis and corporate debt maturity: The role of banking structure

This paper analyses the influence of the financial crisis on corporate debt maturity for 39 countries during the period 1995–2012. The results reveal the importance of the dependence of firms on external finance and the banking structure of the countries on debt maturity during the financial crisis. Corporate debt maturity was found to decline during the financial crisis. However, only those firms that were more dependent on external finance before the onset of the financial crisis suffered this reduction. The reduction in corporate debt maturity is the result of a higher average increase in short-term debt than in long-term debt. The financial crisis had a stronger negative effect on corporate debt maturity in countries with less bank concentration, while the debt maturity of larger firms decreased less as a result of the financial crisis than the debt maturity of smaller firms in countries where banks play an important role in the financing of the private sector.

Cross‐Country Evidence on the Importance of Auditor Choice to Corporate Debt Maturity

AbstractWe examine the importance of Big Four audits in reducing agency costs evident in corporate debt maturity worldwide. Analyzing a large sample of public firms from 42 countries reveals that the fraction of long‐term debt in firms' capital structures rises with the presence of a Big Four auditor, suggesting that higher‐quality audits substitute for short‐term debt for monitoring purposes. In additional analyses, we find that the role that auditor choice plays in debt maturity is concentrated in firms from countries with strong legal institutions governing property rights and creditor rights. Collectively, our research implies that Big Four audits matter to corporate debt maturity, although the impact is isolated in firms operating in countries with more protective legal regimes.

CEO Inside Debt and Corporate Debt Maturity Structure

This paper examines the relation between chief executive officer (CEO) inside debt holdings and corporate debt maturity. We provide robust evidence that inside debt has a positive effect on short-maturity debt and that this effect is concentrated in financially unconstrained firms that face lower refinancing risk. Our analysis further shows that CEO inside debt helps reduce the cost of debt financing. Overall, our results indicate that managerial holdings of inside debt facilitate access to external debt financing and reduce refinancing risk, thus incentivizing managers to use less costly shorter term debt.

Corporate social responsibility and firm debt maturity

In this article we extend the streams of research on the capital structure of socially responsible firms by studying the impact of Corporate Social Responsibility (CSR) on firm debt maturity. Using...

Financial reforms, financial openness, and corporate debt maturity: International evidence

We study how credit market deregulation and financial openness have changed corporate debt maturity. The evidence comes from a large panel of publicly traded firms in 38 countries in the post 1994 period. Reforms are measured with a comprehensive index that tracks six separate dimensions. We find that these transformations have lengthened debt maturity in advanced economies as expected, suggesting that in these countries corporate credit markets have become deeper. In emerging economies, the picture is more mixed: more international openness has led to shorter debt maturity. The effects of financial sector reforms on debt maturity differ depending on the type of reform.