IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Determinants of corporate debt maturity in South America: Do institutional quality and financial development matter?

  • Kirch, Guilherme
  • Terra, Paulo Renato Soares
Registered author(s):

    We test whether a country's level of financial development or institutional quality (or both) has a first‐order effect on corporate debt maturity decisions on a sample of 359 non-financial firms from five South American countries over a 12‐year period. We find that there is a substantial dynamic component in the determination of a firm's debt maturity, and firms face moderate adjustment frictions toward their optimal maturities. More importantly, the level of financial development does not influence debt maturity, whereas the institutional quality of a country has a significant positive effect on the level of long-term debt in a firm's financial structure. Our results support the hypothesis that the quality of national institutions is an important determinant of corporate financing in general and of debt maturity in particular.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.sciencedirect.com/science/article/pii/S0929119912000491
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 18 (2012)
    Issue (Month): 4 ()
    Pages: 980-993

    as
    in new window

    Handle: RePEc:eee:corfin:v:18:y:2012:i:4:p:980-993
    Contact details of provider: Web page: http://www.elsevier.com/locate/jcorpfin

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2002. "Government Ownership of Banks," Journal of Finance, American Finance Association, vol. 57(1), pages 265-301, 02.
    2. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 1998. "Corporate Ownership Around the World," Harvard Institute of Economic Research Working Papers 1840, Harvard - Institute of Economic Research.
    3. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2006. "What Works in Securities Laws?," Scholarly Articles 27867135, Harvard University Department of Economics.
    4. Guedes, Jose & Opler, Tim, 1996. " The Determinants of the Maturity of Corporate Debt Issues," Journal of Finance, American Finance Association, vol. 51(5), pages 1809-33, December.
    5. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 222-79, April.
    6. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, 02.
    7. Levine, Ross, 2002. "Bank-Based or Market-Based Financial Systems: Which Is Better?," Journal of Financial Intermediation, Elsevier, vol. 11(4), pages 398-428, October.
    8. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    9. Antonios Antoniou & Yilmaz Guney & Krishna Paudyal, 2006. "The Determinants of Debt Maturity Structure: Evidence from France, Germany and the UK," European Financial Management, European Financial Management Association, vol. 12(2), pages 161-194.
    10. Giannetti, M., 2000. "Do Better Institutions Mitigate Agency Problems? Evidence from Corporate Finance Choices," Papers 376, Banca Italia - Servizio di Studi.
    11. Leamer, Edward E, 1985. "Sensitivity Analyses Would Help," American Economic Review, American Economic Association, vol. 75(3), pages 308-13, June.
    12. Alex Kane & Alan J. Marcus & Robert L. McDonald, 1984. "Debt Policy and the Rate of Return Premium to Leverage," NBER Working Papers 1439, National Bureau of Economic Research, Inc.
    13. Fan, Joseph P. H. & Titman, Sheridan & Twite, Garry, 2012. "An International Comparison of Capital Structure and Debt Maturity Choices," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 47(01), pages 23-56, April.
    14. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer, . "What Works in Securities Laws?," Working Paper 19491, Harvard University OpenScholar.
    15. Graham, John R., 1996. "Proxies for the corporate marginal tax rate," Journal of Financial Economics, Elsevier, vol. 42(2), pages 187-221, October.
    16. Calderon Cesar Augusto & Chong Alberto & Loayza Norman V., 2002. "Determinants of Current Account Deficits in Developing Countries," The B.E. Journal of Macroeconomics, De Gruyter, vol. 2(1), pages 1-33, March.
    17. Booth, L. & Asli Demirgu-Kunt, V.A. & Maksimovic, V., 1999. "Capital Structure in Developing Countries," Rotman School of Management - Finance 00-001, Rotman School of Management, University of Toronto.
    18. Juan Botero & Simeon Djankov & Rafael LaPorta & Florencio López-de-Silanes & Andrei Shleifer, . "The Regulation of Labor," Working Paper 19483, Harvard University OpenScholar.
    19. Shane A. Johnson, 2003. "Debt Maturity and the Effects of Growth Opportunities and Liquidity Risk on Leverage," Review of Financial Studies, Society for Financial Studies, vol. 16(1), pages 209-236.
    20. Douglas W. Diamond, 1991. "Debt Maturity Structure and Liquidity Risk," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 709-737.
    21. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
    22. Li, Baibing & Martin, Elaine B. & Morris, A. Julian, 2002. "On principal component analysis in L1," Computational Statistics & Data Analysis, Elsevier, vol. 40(3), pages 471-474, September.
    23. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, . "Investor Protection and Corporate Governance," Working Paper 19455, Harvard University OpenScholar.
    24. Barclay, Michael J. & Marx, Leslie M. & Smith, Clifford Jr., 2003. "The joint determination of leverage and maturity," Journal of Corporate Finance, Elsevier, vol. 9(2), pages 149-167, March.
    25. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Agency Problems and Dividend Policies Around the World," Harvard Institute of Economic Research Working Papers 1839, Harvard - Institute of Economic Research.
    26. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Harvard Institute of Economic Research Working Papers 1788, Harvard - Institute of Economic Research.
    27. Stohs, Mark Hoven & Mauer, David C, 1996. "The Determinants of Corporate Debt Maturity Structure," The Journal of Business, University of Chicago Press, vol. 69(3), pages 279-312, July.
    28. de Jong, A. & Kabir, R. & Nguyen, T.T., 2007. "Capital Structure around the World: The Roles of Firm- and Country-Specific Determinants," ERIM Report Series Research in Management ERS-2007-058-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    29. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
    30. Barclay, Michael J & Smith, Clifford W, Jr, 1995. " The Maturity Structure of Corporate Debt," Journal of Finance, American Finance Association, vol. 50(2), pages 609-31, June.
    31. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
    32. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
    33. Levine, Ross, 1999. "Law, Finance, and Economic Growth," Journal of Financial Intermediation, Elsevier, vol. 8(1-2), pages 8-35, January.
    34. Fan, Joseph P.H. & Wei, K.C. John & Xu, Xinzhong, 2011. "Corporate finance and governance in emerging markets: A selective review and an agenda for future research," Journal of Corporate Finance, Elsevier, vol. 17(2), pages 207-214, April.
    35. Steve Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    36. Demirguc-Kunt, Asli & Maksimovic, Vojislav, 1999. "Institutions, financial markets, and firm debt maturity," Journal of Financial Economics, Elsevier, vol. 54(3), pages 295-336, December.
    37. Michael J. Barclay & Clifford W. Smith, 1996. "On Financial Architecture: Leverage, Maturity, And Priority," Journal of Applied Corporate Finance, Morgan Stanley, vol. 8(4), pages 4-17.
    38. Kusnadi, Yuanto & Wei, K.C. John, 2011. "The determinants of corporate cash management policies: Evidence from around the world," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 725-740, June.
    39. Barnea, Amir & Haugen, Robert A & Senbet, Lemma W, 1980. " A Rationale for Debt Maturity Structure and Call Provisions in the Agency Theoretic Framework," Journal of Finance, American Finance Association, vol. 35(5), pages 1223-34, December.
    40. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
    41. Aydin Ozkan, 2000. "An empirical analysis of corporate debt maturity structure," European Financial Management, European Financial Management Association, vol. 6(2), pages 197-212.
    42. Botero, J. C. & Djankov, S. & Porta, R. L. & Lopez-de-Silanes, F. & Shleifer, Andrei, 2004. "The Regulation of Labor," Scholarly Articles 27867241, Harvard University Department of Economics.
    43. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    44. Morris, James R, 1976. "On Corporate Debt Maturity Strategies," Journal of Finance, American Finance Association, vol. 31(1), pages 29-37, March.
    45. David Roodman, 2006. "How to Do xtabond2: An Introduction to "Difference" and "System" GMM in Stata," Working Papers 103, Center for Global Development.
    46. Asli Demirgüç-Kunt & Vojislav Maksimovic, 1998. "Law, Finance, and Firm Growth," Journal of Finance, American Finance Association, vol. 53(6), pages 2107-2137, December.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:corfin:v:18:y:2012:i:4:p:980-993. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.