The Determinants of Corporate Debt Maturity Structure

By Ewa J. Kleczyk, PhD. 2012

305 citations recorded by the source corpus.

According to Stiglitz (1974) and Modigliani and Miller (1958), in efficient and integrated markets, the financial management policy cannot decrease the costs of capital due to the interrelation between the different types of capital costs. Consequently, there is no gain from substituting debt for equity. However, evidence has been found against this claim, demonstrating that equity financing is related to the predictability of stock returns. For example, firms issue equity when the equity premium is low in order to time an inefficient market and reduce the cost of capital borrowing and/or to optimize capital structure together with expected returns (Baker et al., 2003). On the other hand, there is substantially less literature on debt financing. For example, according to Bosworth (1971), debt maturity is related to market conditions, such as the interest and inflation rates. Furthermore, Barclay and Smith (1995) find firms with higher information asymmetries to issue short-term debt. They determine a positive relationship between debt-maturity and dividend yield as well as a negative relationship between the maturity of debt and the term-spread (Barclay & Smith, 1995). Although the above papers provide support for the association between debt and returns, none offers information on the cost of capital borrowing at different times of debt maturity due to lack of analysis of returns data.

Subfields: Accounting, Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/91b56b0726b95f337614bb01eac5f8099cd9d359

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Citations in the corpus

• Ownership structure, control contestability, and corporate debt maturity (2015, background): “Moreover, consistent with prior research (e.g., Dang, 2011; Johnson, 2003; Lin et al., 2013; Stohs and Mauer, 1996; Zheng et al., 2012), we find that the coefficient estimate on LEVERAGE_RATIO is positive and statistically significant at the 1% level.”
• Corporate Ownership Structure and the Choice Between Bank Debt and Public Debt (2013, unknown): “Second, as has been widely shown in the literature, bank debt on average has a much shorter maturity (e.g., Tufano, 1993; Stohs and Mauer, 1996; Johnson, 1997; Park, 2000) and is more often secured by collateral (e.”
• Do Debt Contract Enforcement Costs Affect Financing and Asset Structure (2014, unknown): “If firms try to match the maturity of their assets and liabilities (Stohs and Mauer (1994)), say due to collateral requirements from lenders, the increase in long-term debt and the reduction in short-term debt and trade-credit may be accompanied by an increase in the average maturity of firm’s…”
• Corporate Bond Credit Spreads and Forecast Dispersion (2010, unknown): “We define RATINGSQ as the square of these ordinal ratings, following Stohs and Mauer (1995). By squaring ordinal ratings we capture the nonlinear increase in credit risk between consecutive ratings groups.”
• Corporate Leverage, Debt Maturity and Credit Supply: The Role of Credit Default Swaps (2013, methodology): “This is substantially longer than the average maturity of 3.4 years reported in Stohs & Mauer (1996) for 323 manufacturing firms over the 1980-1989 period and suggests that debt maturities of large firms have increased significantly over the past two decades.”
• Determinants of capital structure: evidence from a major developing economy (2014, unknown): “Barclay and Smith (1995) and Stohs and Mauer (1996) are notable early papers on the subject.”