The debt-maturity structure of small firms in a creditor-oriented environment
AbstractOnce 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 InfoPaper provided by Vlerick Leuven Gent Management School in its series Vlerick Leuven Gent Management School Working Paper Series with number 2003-24.
Length: 32 pages
Date of creation: 18 Sep 2003
Date of revision:
debt maturity; capital structure; small firms;
Other versions of this item:
- D. Heyman & M. Deloof & H. Ooghe, 2003. "The Debt-Maturity Structure of Small Firms in a Creditor-Oriented Environment," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/197, Ghent University, Faculty of Economics and Business Administration.
- 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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