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Investment, Implicit Debt Targets and Debt Maturity

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  • Enzo Dia
  • Marco Rispoli

Abstract

We analyse industrial firms’ financial policies by modelling investment and debt issuances as endogenous variables. In our setup, firms issue costly short-and long-term debt to cover their capital expenditure. This strategy does not assume the existence of explicit debt targets but allows the recovery of implicit debt targets from firms’ investment and financing decisions. The empirical analysis reveals sizeable cross-sectional variation: Implicit debt targets vary with financial conditions, firm size, and investment opportunities. Furthermore, we find that the magnitude of the implicit debt target ratio is sensitive to the investment type.

Suggested Citation

  • Enzo Dia & Marco Rispoli, 2022. "Investment, Implicit Debt Targets and Debt Maturity," CRANEC - Working Papers del Centro di Ricerche in Analisi economica e sviluppo economico internazionale crn2204, Università Cattolica del Sacro Cuore, Centro di Ricerche in Analisi economica e sviluppo economico internazionale (CRANEC).
    • Handle: RePEc:crn:wpaper:crn2204
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    References listed on IDEAS

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    More about this item

    Keywords

    Implicit Debt Targets; Debt Maturity; Financial Cost; Maturity-matching;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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