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The debt-maturity structure of small firms in a creditor-oriented environment

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  • Dries Heyman
  • Marc Deloof
  • Hubert Ooghe

    ()
    (Vlerick Leuven Gent Management School)

Abstract

Once a firm decides to issue debt, the characteristics of this debt instrument should be considered. One of the critical decisions involves debt maturity. Using a sample of 1091 Belgian small firms from 1996 until 2000, this study analyses the determinants of the corporate debt-maturity structure of small firms in a creditor-oriented s ystem. Consistent with previous empirical evidence on large firms, the present results strongly support the maturity-matching principle. The hypothesis that firms with many growth opportunities will borrow on the short term as a response to the under-investment problem, is not supported. There is a clear relation between the credit worthiness of a firm and the debt-maturity structure. Firms with a better credit score borrow on the long term, whereas firms with a poor credit quality are apparently forced to borrow on the short term. This evidence contradicts the expected U-shaped relationship between credit worthiness and debt maturity. Size negatively influences debt maturity.

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Bibliographic Info

Paper provided by Vlerick Leuven Gent Management School in its series Vlerick Leuven Gent Management School Working Paper Series with number 2003-24.

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Length: 32 pages
Date of creation: 18 Sep 2003
Date of revision:
Handle: RePEc:vlg:vlgwps:2003-24

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Keywords: debt maturity; capital structure; small firms;

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References

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  7. Diamond, Douglas W., 1993. "Seniority and maturity of debt contracts," Journal of Financial Economics, Elsevier, vol. 33(3), pages 341-368, June.
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Cited by:
  1. Federico Guerrero, 2006. "Early-Stage Globalization and Corporate Debt Maturity: The Case of South Korea, 1980-94," Working Papers 06-016, University of Nevada, Reno, Department of Economics & University of Nevada, Reno , Department of Resource Economics.
  2. Federico Guerrero & Elliott Parker, 2006. "Financial Liberalization and Corporate Debt Maturity in Thailand, 1993-97," Working Papers 06-001, University of Nevada, Reno, Department of Economics & University of Nevada, Reno , Department of Resource Economics.
  3. Guerrero, Federico, 2007. "Early-stage financial globalization and corporate debt maturity: The case of South Korea, 1980-1994," Journal of Asian Economics, Elsevier, vol. 18(5), pages 809-824, October.
  4. Pavel K├Ârner, 2007. "The Determinants of Corporate Debt Maturity Structure: Evidence from Czech Firms (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(3-4), pages 142-158, June.

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