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The Effects of Short-Term Liabilities on Profitability: The Case of Germany

  • Christopher F. Baum

    (Boston College)

  • Dorothea Schaefer

    (DIW Berlin)

  • Oleksandr Talavera

    (DIW Berlin)

Using data from Germany this paper examines the direct effect of non-financial firms' use of short-term versus long-term liabilities. We develop a structural model of a firm's value maximization problem that predicts that profitability of the firm will change if firms alter their use of short-term versus long-term liabilities. We find that firms that rely more heavily on short-term liabilities are likely to be more profitable

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Paper provided by Money Macro and Finance Research Group in its series Money Macro and Finance (MMF) Research Group Conference 2006 with number 61.

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Date of creation: 02 Feb 2007
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Handle: RePEc:mmf:mmfc06:61
Contact details of provider: Web page: http://www.essex.ac.uk/afm/mmf/index.html

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  1. Agarwal, Rajshree & Ann Elston, Julie, 2001. "Bank-firm relationships, financing and firm performance in Germany," Economics Letters, Elsevier, vol. 72(2), pages 225-232, August.
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  7. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
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  9. Audretsch, David B & Elston, Julie Ann, 1994. "Does Firm Size Matter? Evidence on the Impacts of Liquidity Constraints on Firm Investment Behaviour in Germany," CEPR Discussion Papers 1072, C.E.P.R. Discussion Papers.
  10. 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.
  11. Sudip Datta & Mai Iskandar-Datta & Kartik Raman, 2005. "Managerial Stock Ownership and the Maturity Structure of Corporate Debt," Journal of Finance, American Finance Association, vol. 60(5), pages 2333-2350, October.
  12. Audretsch, David B. & Elston, Julie Ann, 2000. "Does firm size matter? Evidence on the impact of liquidity constraint on firm investment behavior in Germany," HWWA Discussion Papers 113, Hamburg Institute of International Economics (HWWA).
  13. Aydin Ozkan, 2002. "The determinants of corporate debt maturity: evidence from UK firms," Applied Financial Economics, Taylor & Francis Journals, vol. 12(1), pages 19-24.
  14. Diamond, Douglas W, 1991. "Debt Maturity Structure and Liquidity Risk," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 709-37, August.
  15. Simon Gilchrist & Charles Himmelberg, 1999. "Investment: Fundamentals and Finance," NBER Chapters, in: NBER Macroeconomics Annual 1998, volume 13, pages 223-274 National Bureau of Economic Research, Inc.
  16. Ozkan, Aydin & Ozkan, Neslihan, 2004. "Corporate cash holdings: An empirical investigation of UK companies," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2103-2134, September.
  17. Oliver Hart & John Moore, 1998. "Default And Renegotiation: A Dynamic Model Of Debt," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 1-41, February.
  18. Whited, Toni M, 1992. " Debt, Liquidity Constraints, and Corporate Investment: Evidence from Panel Data," Journal of Finance, American Finance Association, vol. 47(4), pages 1425-60, September.
  19. 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.
  20. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
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