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The debt-maturity structure of small firms in a creditor-oriented environment

Author

Listed:
  • Dries Heyman
  • Marc Deloof
  • Hubert Ooghe

    (Vlerick Leuven Gent Management School)

Abstract

Once a firm decides to issue debt, the characteristics of this debt instrument should be considered. One of the critical decisions involves debt maturity. Using a sample of 1091 Belgian small firms from 1996 until 2000, this study analyses the determinants of the corporate debt-maturity structure of small firms in a creditor-oriented s ystem. Consistent with previous empirical evidence on large firms, the present results strongly support the maturity-matching principle. The hypothesis that firms with many growth opportunities will borrow on the short term as a response to the under-investment problem, is not supported. There is a clear relation between the credit worthiness of a firm and the debt-maturity structure. Firms with a better credit score borrow on the long term, whereas firms with a poor credit quality are apparently forced to borrow on the short term. This evidence contradicts the expected U-shaped relationship between credit worthiness and debt maturity. Size negatively influences debt maturity.

Suggested Citation

  • Dries Heyman & Marc Deloof & Hubert Ooghe, 2003. "The debt-maturity structure of small firms in a creditor-oriented environment," Vlerick Leuven Gent Management School Working Paper Series 2003-24, Vlerick Leuven Gent Management School.
    • Handle: RePEc:vlg:vlgwps:2003-24
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    2. Pavel Körner, 2007. "The Determinants of Corporate Debt Maturity Structure: Evidence from Czech Firms (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(3-4), pages 142-158, June.
    3. Ashfaq Habib & M. Ishaq Bhatti & Muhammad Asif Khan & Zafar Azam, 2021. "Cash Holding and Firm Value in the Presence of Managerial Optimism," JRFM, MDPI, vol. 14(8), pages 1-18, August.
    4. Robert Lensink & Thi Thu Tra Pham, 2011. "On the signalling property of debt maturity: empirical evidence from a private bank in Vietnam," Applied Economics Letters, Taylor & Francis Journals, vol. 18(9), pages 809-816.
    5. Cadot, Julien, 2011. "Collaterals, Bank Monitoring and Performance: the Case of Newly Established Wine Farmers," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103414, Agricultural and Applied Economics Association.
    6. Guerrero, Federico, 2007. "Early-stage financial globalization and corporate debt maturity: The case of South Korea, 1980-1994," Journal of Asian Economics, Elsevier, vol. 18(5), pages 809-824, October.
    7. Hernandez-Canovas, Gines & Koeter-Kant, Johanna, 2006. "SME Financing in Europe: Cross-Country Determinants of Debt Maturity," Serie Research Memoranda 0009, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    8. Sonia Baños-Caballero & Pedro J. García-Teruel & Pedro Martínez-Solano, 2016. "Financing of working capital requirement, financial flexibility and SME performance," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 17(6), pages 1189-1204, November.

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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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