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Why do firms borrow on a short-term basis ? Evidence from European countries

  • Valérie Oheix
  • Dorothée Rivaud-Danset

This paper investigates empirically the use of short-term bank loans by firms. We face two analytical frameworks. According to the corporate finance theory, short-term and long-term ebts are substitutes, while in the credit channel literature they are distinct and complementary vehicles. We estimate a model that explains the level of short-term bank debt, using panel data from the BACH database for six European countries (1989-2003). Our results indicate that the two types of bank loans are complements. They show that short-term bank debt should be analysed as a specific vehicle that finances current assets, as in the credit channel literature.

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File URL: http://economix.fr/pdf/dt/2009/WP_EcoX_2009-14.pdf
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Paper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2009-14.

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Length: 32 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:drm:wpaper:2009-14
Contact details of provider: Postal: 200 Avenue de la République, Bât. G - 92001 Nanterre Cedex
Web page: http://economix.fr
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