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The Effects of Short-Term Liabilities on Profitability: The Case of Germany

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Author Info
Christopher F. Baum (Boston College)
Dorothea Schaefer (DIW Berlin)
Oleksandr Talavera (DIW Berlin)

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Abstract

Using data from Germany this paper examines the direct effect of non-financial firms' use of short-term versus long-term liabilities. We develop a structural model of a firm's value maximization problem that predicts that profitability of the firm will change if firms alter their use of short-term versus long-term liabilities. We find that firms that rely more heavily on short-term liabilities are likely to be more profitable

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Publisher Info
Paper provided by Money Macro and Finance Research Group in its series Money Macro and Finance (MMF) Research Group Conference 2006 with number 61.

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Date of creation: 02 Feb 2007
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Handle: RePEc:mmf:mmfc06:61

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Related research
Keywords: profitability short-term liabilities maturity structure capital structure

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Find related papers by JEL classification:
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
G30 - Financial Economics - - Corporate Finance and Governance - - - General

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