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Why are US firms using more short-term debt?

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  • Custódio, Cláudia
  • Ferreira, Miguel A.
  • Laureano, Luís

Abstract

We show that corporate use of long-term debt has decreased in the US over the past three decades and that this trend is heterogeneous across firms. The median percentage of debt maturing in more than 3 years decreased from 53% in 1976 to 6% in 2008 for the smallest firms but did not decrease for the largest firms. The decrease in debt maturity was generated by firms with higher information asymmetry and new firms issuing public equity in the 1980s and 1990s. Finally, we show that demand-side factors do not fully explain this trend and that public debt markets' supply-side factors play an important role. Our findings suggest that the shortening of debt maturity has increased the exposure of firms to credit and liquidity shocks.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 108 (2013)
Issue (Month): 1 ()
Pages: 182-212

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Handle: RePEc:eee:jfinec:v:108:y:2013:i:1:p:182-212

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Web page: http://www.elsevier.com/locate/inca/505576

Related research

Keywords: Corporate debt maturity; Information asymmetry; Agency costs; New listings; Supply effects;

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References

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Cited by:
  1. Pérez Artica, Rodrigo & Brufman, Leandro & Martinez, Lisana, 2013. "What are the causes of the growing trend of excess savings of the corporate sector in developed countries? An empirical analysis of three hypotheses," MPRA Paper 47410, University Library of Munich, Germany.
  2. Alves, Paulo & Francisco, Paulo, 2013. "The Impact of Institutional Environment in Firms´ Capital Structure during the Recent Financial Crises," MPRA Paper 51300, University Library of Munich, Germany.
  3. Brufman, Leandro & Martinez, Lisana & Artica, Rodrigo Perez, 2013. "What are the causes of the growing trend of excess savings of the corporate sector in developed countries ? an empirical analysis of three hypotheses," Policy Research Working Paper Series 6571, The World Bank.
  4. Teodora Paligorova & João Santos, 2014. "Rollover Risk and the Maturity Transformation Function of Banks," Working Papers 14-8, Bank of Canada.
  5. Bessler, Wolfgang & Drobetz, Wolfgang & Haller, Rebekka & Meier, Iwan, 2013. "The international zero-leverage phenomenon," Journal of Corporate Finance, Elsevier, vol. 23(C), pages 196-221.

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