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Debt Maturity Structure and Firm Investment

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  • Varouj A. Aivazian
  • Ying Ge
  • Jiaping Qiu

Abstract

This study shows that the maturity structure of a firm’s debt has a significant impact on its investment decisions. We show, after controlling for the effect of the overall level of leverage, that a higher percentage of long-term debt in total debt significantly reduces investment for firms with high growth opportunities. In contrast, the correlation between debt maturity and investment is not significant for firms with low growth opportunities. The results are strong at the firm level and at the business segment level. These results hold even after controlling for the endogeneity problem inherent in the relationship between total leverage, the maturity composition of leverage, and investment.

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Bibliographic Info

Article provided by Financial Management Association in its journal Financial Management.

Volume (Year): 34 (2005)
Issue (Month): 4 (Winter)
Pages:

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Handle: RePEc:fma:fmanag:aivaziangeqiu05

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Cited by:
  1. Jacques Sarremejeanne, 2011. "Les déterminants financiers des cessions-bail," Post-Print hal-00650571, HAL.
  2. Lai, Van Son & Soumaré, Issouf, 2010. "Credit insurance and investment: A contingent claims analysis approach," International Review of Financial Analysis, Elsevier, vol. 19(2), pages 98-107, March.
  3. Viviana Fernández, 2007. "Spatial Linkages in International Financial Markets," The Institute for International Integration Studies Discussion Paper Series iiisdp234, IIIS.
  4. Dang, Viet Anh, 2013. "An empirical analysis of zero-leverage firms: New evidence from the UK," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 189-202.

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