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Industry Structure and Corporate Debt Maturity

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  • Otgontsetseg Erhemjamts
  • Kartik Raman
  • Husayn Shahrur

Abstract

We examine how industry competition affects firms’ choice of short‐term debt. We find that the percentage of short‐term debt is positively related to industry concentration at low levels of concentration, and inversely related to industry concentration at higher levels of concentration. This nonlinear relation is stronger in industries where firms are either more homogeneous or compete more aggressively. Moreover, we find that firms with shorter‐maturity debt are less aggressive than their rivals in the product market. The overall evidence suggests that although financial contracts alleviate agency problems, they exacerbate the risk of predation.

Suggested Citation

  • Otgontsetseg Erhemjamts & Kartik Raman & Husayn Shahrur, 2010. "Industry Structure and Corporate Debt Maturity," The Financial Review, Eastern Finance Association, vol. 45(3), pages 627-657, August.
    • Handle: RePEc:bla:finrev:v:45:y:2010:i:3:p:627-657
    DOI: 10.1111/j.1540-6288.2010.00264.x
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    Cited by:

    1. Anagnostopoulou, Seraina C. & Drakos, Konstantinos, 2016. "Bank loan terms and conditions: Is there a macro effect?," Research in International Business and Finance, Elsevier, vol. 37(C), pages 269-282.
    2. Zaheer Anwer & Shamsher Mohamad & Wajahat Azmi & Akram Shavkatovich Hasanov, 2022. "Product market fluidity and religious constraints: evidence from the US market," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(S1), pages 1761-1817, April.
    3. Babar, Md. & Habib, Ahsan, 2021. "Product market competition in accounting, finance, and corporate governance: A review of the literature," International Review of Financial Analysis, Elsevier, vol. 73(C).
    4. Wu, Julia Yonghua & Opare, Solomon & Bhuiyan, Md. Borhan Uddin & Habib, Ahsan, 2022. "Determinants and consequences of debt maturity structure: A systematic review of the international literature," International Review of Financial Analysis, Elsevier, vol. 84(C).
    5. Tang, Yuehua, 2018. "When does competition mitigate agency problems?," Journal of Corporate Finance, Elsevier, vol. 51(C), pages 258-274.
    6. Onur Kemal Tosun & Lemma W. Senbet, 2020. "Does internal board monitoring affect debt maturity?," Review of Quantitative Finance and Accounting, Springer, vol. 54(1), pages 205-245, January.

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