Download or read book Debt Maturity and Commitment on Firm Policies written by Andrea Gamba and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Debt Maturity and the Use of Short Term Debt written by Sophia Chen and published by International Monetary Fund. This book was released on 2019-02-05 with total page 77 pages. Available in PDF, EPUB and Kindle. Book excerpt: The maturity structure of debt can have financial and real consequences. Short-term debt exposes borrowers to rollover risk (where the terms of financing are renegotiated to the detriment of the borrower) and is associated with financial crises. Moreover, debt maturity can have an impact on the ability of firms to undertake long-term productive investments and, as a result, affect economic activity. The aim of this paper is to examine the evolution and determinants of debt maturity and to characterize differences across countries.
Download or read book The Maturity Structure of Debt written by Fabio Schiantarelli and published by World Bank Publications. This book was released on 1997 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Optimal Debt Dynamics Issuance Costs and Commitment written by Luca Benzoni and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate optimal capital structure and debt maturity policies in the presence of fixed issuance costs. We identify the global-optimal policy that generates the highest values of equity across all states of nature consistent with limited liability. The optimal policy without commitment provides almost as much tax benefits to debt as does the global-optimal policy and, in the limit of vanishing issuance costs, allows firms to extract 100% of EBIT. This limiting case does not converge to the equilibrium of DeMarzo and He (2019), who report no tax benefits to debt when issuance costs are set to zero at the outset.
Download or read book Debt Maturity and Firm Performance A Panel Study of Indian Companies written by Fabio Schiantarelli and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: February 1997 Is long-term debt better than short-term debt in its effect on firm performance? The answer appears to be yes for privately owned companies in India. Economic policymakers traditionally hold the view that, because of imperfections in capital markets, a shortage of long-term finance acts as a barrier to industrial performance and growth. Long-term finance is thought to allow firms to invest in more productive technologies, even when they do not produce immediate payoffs, without the fear of premature liquidation. As a result, special state-supported term-lending institutions have been established, especially in developing countries. But some believe that short-term finance may offer better incentives because it allows suppliers of finance to monitor and control firms more effectively, thus improving the firms' performance. Schiantarelli and Srivastava empirically investigate the determinants and consequences of the term structure of debt. Using a rich panel of data on privately owned companies in India, they also examine the influence of debt maturity structures on those firms' performance, especially on productivity. The results are not conclusive, but seem to support conventional beliefs about the importance of long-term finance to firm performance. Heavy leveraging, however, has a strong negative impact on productivity. They base their econometric evidence on estimates of a maturity equation and of a production function augmented by financial variables. The data on which these results are based have been generated by a financial system in which there is little competition, in which state-owned financial institutions are not guided by the profit motive and have no control over interest rates, so one cannot say whether short term finance would have been more beneficial in a less regulated system. Moreover, by the end of the 1980s, the capital base of India's government-owned financial institutions had been severely eroded and they carried a heavy burden of nonperforming assets. This means that the benefits of long term finance must be weighed against the costs. This paper - a product of the Finance and Private Sector Development Division, Policy Research Department - was prepared for the conference Firm Finance: Theory and Evidence held on June 14, 1996. The study was funded by the Bank's Research Support Budget under research project Term Finance (RPO 679-62).
Download or read book Debt Dynamics with Fixed Issuance Costs written by Luca Benzoni and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate equilibrium debt dynamics for a firm that cannot commit to a future debt policy and is subject to a fixed restructuring cost. We formally characterize equilibria when the firm is not required to repurchase outstanding debt prior to issuing additional debt. For realistic values of issuance costs and debt maturity, the no-commitment policy generates tax benefits that are similar to those obtained by a benchmark policy with commitment. For positive but arbitrarily small issuance costs, there are maturities for which shareholders extract essentially the entire claim to cash-flows.
Download or read book Debt Maturity and Firm Performance written by Fabio Schiantarelli and published by . This book was released on 1997 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Debt Maturity Without Commitment written by Dirk Niepelt and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Maturity Structure of Debt Determinants and Effects on Firms Performance Evidence from the United Kingdom and Italy written by Fabio Schiantarelli and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: January 1997 Firms tend to match assets with liabilities, and more profitable firms have more long-term debt. Long-term debt has a positive effect on firms' performance, but this is not true when a large fraction of that debt is subsidized. The authors empirically investigate the determinants and consequences of the maturity structure of debt, using data from a panel of UK and Italian firms. They find that in choosing a maturity structure for debt, firms tend to match assets and liabilities, as both conventional wisdom and some recent theoretical models suggest. They conclude that more profitable firms (as measured by the ratio of cash flow to capital) tend to have more long-term debt. This finding is consistent with the dominant role played by firms' fear of liquidation and loss of control associated with short-term debt. It may also reflect the willingness of financial markets to provide long-term finance only to quality firms. The data do not support the hypothesis that short-term debt, through better monitoring and control, boosts efficiency and growth -rather, the opposite can be concluded. In both countries, the data suggest a positive relationship between initial debt maturity and the firms' subsequent medium-term performance (i.e., profitability and growth in real sales). In both countries total factor productivity (TFP) depends positively on the length of debt maturity when the maturity variable is entered both contemporaneously and lagged. But in Italy the positive effect of the length of maturity on productivity is substantially reduced or even reversed when the proportion of subsidized credit increases. The authors document the relationship between firms' characteristics and their choice of shorter or long-term debt by estimating a maturity equation and interpreting the results in light of insights from theoretical literature, and by analyzing the effects of maturity on firms' later performance in terms of profitability, growth, and productivity; assess how TFP depends on the degree of leverage and the proportion of longer and shorter-term debt; and analyze the relationship between firms' debt maturity and investment. This paper--a product of the Finance and Private Sector Development Division, Policy Research Department--is part of a larger effort in the department to study the effects of financial structure on economic performance. The study was funded by the Bank's Research Support Budget under the research project Term Finance: Theory and Evidence (RPO 679-62).
Download or read book Dynamic Debt Maturity written by and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: A firm chooses its debt maturity structure and default timing dynamically, both without commitment. Via the fraction of newly issued short-term bonds, equity holders control the maturity structure, which affects their endogenous default decision. A shortening equilibrium with accelerated default emerges when cash-flows deteriorate over time so that debt recovery is higher if default occurs earlier. Self-enforcing shortening and lengthening equilibria may co-exist, with the latter possibly Pareto-dominating the former. The inability to commit to issuance policies can worsen the Leland-problem of the inability to commit to a default policy-a self-fulfilling shortening spiral and adverse default policy may arise.
Download or read book Debt Maturity and Firm Performance written by Antonio Accetturo and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book How Does Economic Policy Uncertainty Affect Corporate Debt Maturity written by Xiang Li and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates whether and how economic policy uncertainty affects corporate debt maturity. Using a cross-country firm-level dataset for France, Germany, Spain, and Italy from 1996 to 2010, we find that an increase in economic policy uncertainty is significantly associated with a shortened debt maturity. Specifically, a 1% increase in economic policy uncertainty is associated with a 0.22% decrease in the long-term debt-to-assets ratio and a 0.08% decrease in debt maturity. Moreover, the impacts of economic policy uncertainty are stronger for innovation-intensive firms. We use firms' flexibility in changing debt maturity and the deviation to leverage target to gauge the causal relationship, and identify the reduced investment and steepened term structure as transmission mechanisms.
Download or read book Debt Maturity Choice and Firms Investment written by Yongjin Kim and published by . This book was released on 2017 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study revisits the relation between firms' choices of debt maturity and their investment in a dynamic world. Prior research, including Myers (1977), suggests that financing with short-term debt resolves the underinvestment problem caused by debt financing. In contrast, I establish that short-term debt can reduce the incentive to invest due to larger exposure to default risk from more frequent debt rollovers. Long-term debt, however, is more subject to illiquidity costs, so firms find optimal maturity by balancing these opposing forces. For the firm with average investment and financing, the agency cost arising from the underinvestment is 0.77% of firm value. This suggests that previous studies overestimate the cost by ignoring firms' flexibility in choosing maturity. I also measure firm-specific agency costs using likelihood-based structural estimation. The measured agency costs show significant cross-sectional variation due to heterogeneity in firm characteristics and convexity of the agency costs. The economy-wide average of the costs is 7.28%, which is considerably higher than the cost for the average firm.
Download or read book Firm and Country Determinants of Debt Maturity International Evidence written by Víctor M. González and published by . This book was released on 2014 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyses the effect of firm- and country-level determinants on debt maturity structure and how this effect varies across countries and across firm size. Results for 39 countries show that firm-level variables such as asset maturity, size, firm quality and leverage affect debt maturity structure. Institutions and banking structure also influence corporate debt maturity. While the efficiency of the legal system, protection of creditors' rights and bank concentration show a positive relationship to debt maturity, the protection of property rights and the weight of banks in the economy have a negative effect on firm debt maturity. However, these firm- and country-level determinants vary according to firm size. The agency costs and signalling hypotheses are more relevant in explaining the debt maturity structure of large firms, while the asset maturity and tax hypotheses are more pertinent in the case of small firms. Most of the country-level determinants of debt maturity are size dependent; in particular, bank concentration has a positive influence on debt maturity only for the subsample of small firms, while the weight of banks in the economy has a negative influence for small firms.
Download or read book Debt Maturity and the Dynamics of Leverage written by Thomas Dangl and published by . This book was released on 2020 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper shows that short debt maturities commit equityholders to leverage reductions when refinancing expiring debt in low-profitability states. However, shorter maturities lead to higher transactions costs since larger amounts of expiring debt need to be refinanced. We show that this tradeoff between higher expected transactions costs against the commitment to reduce leverage in low-profitability states, motivates an optimal maturity structure of corporate debt. Since firms with high costs of financial distress and risky cash flows benefit most from committing to leverage reductions, they have a stronger motive to issue short-term debt. Empirical evidence supports the model predictions.
Download or read book The Effect of Firm Debt Maturity Structure on Firm Value written by William Patrick Andrew and published by . This book was released on 1988 with total page 171 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book International Convergence of Capital Measurement and Capital Standards written by and published by Lulu.com. This book was released on 2004 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:
