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Is there the maturity premium in Taiwan?

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  • Lin, Chaonan
  • Ko, Kuan-Cheng
  • Yang, Nien-Tzu

Abstract

Chaderina et al. (2022) document a new anomaly, namely the maturity premium, to characterize higher returns of long-maturity stocks for the U.S. stock markets. They develop a theoretical model to show that the higher returns of long-maturity stocks are compensation to investors for exposing them to more systematic risk during downturns. In this study, we propose that Chaderina et al.'s (2022) model predicts no maturity premium in Taiwan, a market comprising companies that rely mainly on short-term debt. We confirm this prediction by empirically showing that stocks with more long-maturity debt do not outperform those with more short-maturity debt in Taiwan.

Suggested Citation

  • Lin, Chaonan & Ko, Kuan-Cheng & Yang, Nien-Tzu, 2023. "Is there the maturity premium in Taiwan?," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:pacfin:v:79:y:2023:i:c:s0927538x23000033
    DOI: 10.1016/j.pacfin.2023.101937
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    References listed on IDEAS

    as
    1. Chaderina, Maria & Weiss, Patrick & Zechner, Josef, 2022. "The maturity premium," Journal of Financial Economics, Elsevier, vol. 144(2), pages 670-694.
    2. Barclay, Michael J & Smith, Clifford W, Jr, 1995. "The Maturity Structure of Corporate Debt," Journal of Finance, American Finance Association, vol. 50(2), pages 609-631, June.
    3. Fama, Eugene F. & French, Kenneth R., 2015. "A five-factor asset pricing model," Journal of Financial Economics, Elsevier, vol. 116(1), pages 1-22.
    4. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    5. Fama, Eugene F & French, Kenneth R, 1992. "The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-465, June.
    6. Chih-Wei Wang, 2022. "Debt maturity choice in CEOs’ incentive to signal abilities," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 29(3), pages 632-648, May.
    7. Peter M. Demarzo & Zhiguo He, 2021. "Leverage Dynamics without Commitment," Journal of Finance, American Finance Association, vol. 76(3), pages 1195-1250, June.
    8. 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(1), pages 23-56, February.
    9. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Debt maturity; Cross-section of stock returns; Taiwan stock market; Risk factors;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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