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Does debt maturity influence productivity?

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  • Ryota Nakatani

    (International Monetary Fund)

Abstract

Using firm-level data for seven European and Asian countries over a span of 20 years, this study investigates whether debt maturity influences productivity. Long-term debt is associated with lower productivity for small and medium-sized enterprises (SMEs), whereas larger firms succeed in using long-term financing for productivity improvement. Conversely, short-term debt is also associated with higher productivity. These results can be explained by (i) the moral hazard effects of long-term debt stemming from the less intense monitoring of firm performance and fewer liquidation fears, and (ii) the disciplinary effects of short-term debt to improve short-term performance, such as facilitating access to more productive technologies. As the financial market develops, the positive disciplinary effects of short-term debt on productivity weaken, whereas the negative moral hazard effects of long-term debt dissipate.

Suggested Citation

  • Ryota Nakatani, 2023. "Does debt maturity influence productivity?," Economics Bulletin, AccessEcon, vol. 43(1), pages 116-136.
    • Handle: RePEc:ebl:ecbull:eb-22-00857
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    References listed on IDEAS

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    Cited by:

    1. Ryota Nakatani, 2023. "Sovereign Debt Crisis and Fiscal Devolution," JRFM, MDPI, vol. 17(1), pages 1-9, December.
    2. Nakatani, Ryota, 2024. "Multifactor productivity growth enhancers across industries and countries: Firm-level evidence," MPRA Paper 120503, University Library of Munich, Germany.
    3. Nakatani, Ryota, 2023. "Debt maturity and firm productivity—The role of intangibles," Research in Economics, Elsevier, vol. 77(1), pages 116-121.
    4. Ryota Nakatani, 2024. "Food companies' productivity dynamics: Exploring the role of intangible assets," Agribusiness, John Wiley & Sons, Ltd., vol. 40(1), pages 185-226, January.

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    More about this item

    Keywords

    Debt maturity; Productivity; Financial development; SMEs; Service industry;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • D2 - Microeconomics - - Production and Organizations

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