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 on over 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 International Monetary Fund in its series IMF Working Papers with number 05/201.
Date of creation: 01 Oct 2005
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Other versions of this item:
- 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.).
- Allen N. Berger & Marco A. Espinosa-Vega & W. Scott Frame & Nathan H. Miller, 2004. "Debt maturity, risk, and asymmetric information," Working Paper 2004-32, Federal Reserve Bank of Atlanta.
- NEP-ALL-2006-03-05 (All new papers)
- NEP-BEC-2006-03-05 (Business Economics)
- NEP-CFN-2006-03-05 (Corporate Finance)
- NEP-FMK-2006-03-05 (Financial Markets)
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