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Brand capital on debt maturity structure

Author

Listed:
  • Li, Tongxia
  • Lu, Chun
  • Routledge, James

Abstract

This study examines whether brand capital is associated with debt maturity choice. For listed firms in the U.S. over the period from 1975 to 2019, we find that investment in brand capital through ongoing advertising outlays is positively related to the use of short-term debt. The result is consistent with the hypothesis that high brand capital firms use short-term debt because of beneficial signaling effects. We also find the positive effect of brand capital on the use of short-term debt is more pronounced for higher quality firms and firms with lower financial constraints, which provides further support for the signaling explanation. Finally, we show that brand capital decreases the extent to which investments are financed by using long-term debt and increases the extent to which investments are financed by using short-term debt and equity.

Suggested Citation

  • Li, Tongxia & Lu, Chun & Routledge, James, 2023. "Brand capital on debt maturity structure," Journal of Contemporary Accounting and Economics, Elsevier, vol. 19(3).
    • Handle: RePEc:eee:jocaae:v:19:y:2023:i:3:s1815566923000310
    DOI: 10.1016/j.jcae.2023.100381
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    More about this item

    Keywords

    Brand capital; Debt maturity; Short-term debt; Firm quality;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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