The Effects Of The 2008-2009 Financial Crisis On U.S. Corporate Debt Structure
This paper evaluates the relationships of liquidity, firm size, price change, asset maturity and leverage relative to debt maturity for a sample of U.S. non-financial firms. Secondarily, the objective of the research is to identify any measurable changes in firms' behavior during the 2008-2009 financial crisis with respect to their choice of debt maturity. During the period from 2002 through 2009, data from the sampled firms show significant correlations between liquidity, firm size, asset maturity, and leverage and debt maturity. That is, firms appear to consider liquidity risk when determining the maturity of liabilities. Firms also appear to make an effort to signal their value to the market as a way to reduce mispricing of securities due to information asymmetry. This research therefore provides additional support for the liquidity risk hypothesis, as well as the signaling hypothesis. During the crisis itself, changes in the variables tested did not cause firms to make notable modifications in their behavior, with two exceptions. Firms with increased leverage ratios tend to have longer debt maturity, and this association is even more significant during the crisis. In addition, firms with reduced asset maturity turned to longer-term debt. The recent financial crisis did not appear to significantly affect the other determinants of corporate debt structure. Leverage and asset maturity, however, had a greater impact on firms' decisions during the financial crisis, suggesting that changes in the economic environment affect these determinants individually, but not broadly.
Volume (Year): 43 (2012)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://nysea.bizland.com/|
More information through EDIRC
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.:
- Arvind Krishnamurthy, 2010. "How Debt Markets Have Malfunctioned in the Crisis," Journal of Economic Perspectives, American Economic Association, vol. 24(1), pages 3-28, Winter.
- 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.
- Carlos A. Molina, 2005. "Are Firms Underleveraged? An Examination of the Effect of Leverage on Default Probabilities," Journal of Finance, American Finance Association, vol. 60(3), pages 1427-1459, 06.
- Flannery, Mark J, 1986. " Asymmetric Information and Risky Debt Maturity Choice," Journal of Finance, American Finance Association, vol. 41(1), pages 19-37, March.
- Deesomsak, Rataporn & Paudyal, Krishna & Pescetto, Gioia, 2009.
"Debt maturity structure and the 1997 Asian financial crisis,"
Journal of Multinational Financial Management,
Elsevier, vol. 19(1), pages 26-42, February.
- Rataporn Deesomsak & Krishna Paudyal & Gioia Pescetto, 2007. "Debt Maturity Structure and the 1997 Asian Financial Crisis," Working Papers 2007_01, Durham University Business School.
- Ivashina, Victoria & Scharfstein, David, 2010. "Bank lending during the financial crisis of 2008," Journal of Financial Economics, Elsevier, vol. 97(3), pages 319-338, September.
- 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.
- Diamond, Douglas W, 1991. "Debt Maturity Structure and Liquidity Risk," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 709-37, August.
- 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.
- Murillo Campello & John Graham & Campbell R. Harvey, 2009.
"The Real Effects of Financial Constraints: Evidence from a Financial Crisis,"
NBER Working Papers
15552, National Bureau of Economic Research, Inc.
- Campello, Murillo & Graham, John R. & Harvey, Campbell R., 2010. "The real effects of financial constraints: Evidence from a financial crisis," Journal of Financial Economics, Elsevier, vol. 97(3), pages 470-487, September.
- 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.
- Wu, Chunchi & Ho, Shih-Jen Kathy, 1997. " Financial Ratio Adjustment: Industry-Wide Effects or Strategic Management," Review of Quantitative Finance and Accounting, Springer, vol. 9(1), pages 71-88, July.
- Brick, Ivan E & Ravid, S Abraham, 1985. " On the Relevance of Debt Maturity Structure," Journal of Finance, American Finance Association, vol. 40(5), pages 1423-37, December.
When requesting a correction, please mention this item's handle: RePEc:nye:nyervw:v:43:y:2012:i:1:p:16-32. 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: (Eryk Wdowiak)
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.