Debt maturity, risk, and asymmetric information
AbstractWe test the implications of Flannery’s (1986) and Diamond’s (1991) models concerning the effects of risk and asymmetric information in determining debt maturity, and we examine the overall importance of informational asymmetries in debt maturity choices. We employ data from more than 6,000 commercial loans from 53 large U.S. banks. Our results for low-risk firms are consistent with the predictions of both theoretical models, but our findings for high-risk firms conflict with the predictions of Diamond’s model and with much of the empirical literature. Our findings also suggest a strong quantitative role for asymmetric information in explaining debt maturity.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2004-32.
Date of creation: 2004
Date of revision:
Other versions of this item:
- Marco A Espinosa-Vega & Allen N. Berger & Nathan H. Miller & W. Scott Frame, 2005. "Debt Maturity, Risk, and Asymmetric Information," IMF Working Papers 05/201, International Monetary Fund.
- Allen N. Berger & Marco A. Espinosa-Vega & W. Scott Frame & Nathan H. Miller, 2004. "Debt maturity, risk, and asymmetric information," Finance and Economics Discussion Series 2004-60, Board of Governors of the Federal Reserve System (U.S.).
- NEP-ALL-2005-05-23 (All new papers)
- NEP-BEC-2005-05-23 (Business Economics)
- NEP-CFN-2005-05-23 (Corporate Finance)
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