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 Maturity and Firm Performance written by Fabio Schiantarelli and published by World Bank Publications. This book was released on 1997 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:

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 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 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 Leverage Debt Maturity and Corporate Performance written by Ratnam Vijayakumaran and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper aims to examine the relationship between leverage, debt maturity and firm performance, employing a large panel of Chinese non-financial listed firms. The corporate finance literature widely recognizes that the debt and maturity structure are important mechanisms for addressing the agency problems in modern corporations. We apply the system GMM estimator to control for endogeneity concerns in the study. We find a positive association between leverage and the proportion of long term debt, on one hand, and firm performance, on the other. Our results indicate that leverage and its maturity structure are important determinants of profitability of Chinese listed firms. Our research has significant policy implications in that it suggests that, since China's financial system is dominated by a large banking system, lenders (mainly banks) may extend more long term credit to more productive private sector, which helps to improve performance of these firms. Furthermore, the findings of this study imply that the Chinese government's efforts to improve the governance of its banking system have been successful in enhancing efficiency and prudence in bank's lending and monitoring behavior.

Download or read book Acces to Long Term Debt and Effects on Firms Performance written by Fidel Jaramillo 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 Corporate Debt Maturity and Future Firm Performance Volatility written by Meg Adachi-Sato and published by . This book was released on 2018 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a simple idea that corporate debt maturity should serve as a good indicator of future firm performance volatility. We show in a simple two-period model that the riskiness of corporate investment is a decreasing function of corporate debt maturity. If “observable” corporate debt maturity and ex ante “unobservable” corporate risk-taking is highly correlated, corporate debt maturity should be highly correlated with “ex post” realized firm performance volatility in following years. Using data on publicly listed firms in 10 developing and developed countries over the period 1991-2013, we find that future firm operating performance volatility decreases as corporate debt maturity increases and that future firm value volatility is not associated with corporate debt maturity. In addition, banking sector development and export intensity of a country play an important role in determining firm operating performance volatility.

Download or read book Access to Long Term Debt and Effects of Firm s Performance written by George R. G. Clarke and published by . This book was released on 2017 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent theory increasingly emphasizes the association of short-term debt with higher-quality firms and better incentives. The possibility of premature liquidation, for example, may serve as a disciplinary device to improve firm performance. At the same time the role of long-term debt, especially when it is heavily subsidized, is being rethought because so many development banks are plagued with nonperforming loans and doubts about the selection criteria used in allocating funds. The authors explore empirical evidence about the structure of debt maturity in Ecuadorian firms. They discuss how it has been affected by government intervention in credit markets, and by financial liberalization. Using firm panel data, they investigate the determinants of access to long-term debt in Ecuador. Finally, they provide evidence about how the maturity structure of debt affects firms' performance, particularly productivity and capital accumulation. They find that: a) long-term debt is very unevenly distributed; b) large firms are more likely to have access to long term debt than small firms and are on average more profitable; c) conditional on size, operating profits do not increase probability of receiving long-term credit and may actually decrease it, suggesting that the mechanism used to allocate long-term resources in Ecuador may be flawed; d) the allocation problem was worse for directed credit, though there is evidence this problem was less severe after financial liberalization; e) there is a strong positive association between asset maturity and debt maturity, a matching of assets and liabilities; f) shorter-term loans are not conducive to greater productivity, while long-term loans may lead to improvements in productivity; and g) while long-term loans may positively affect the quality of capital accumulation, they do not have an impact on the amount of fixed investment.

Download or read book The Maturity Structure of Debt written by Schiantarelli and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Maturity Structure of Debt written by Fabio Schiantarelli and published by . This book was released on 2016 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Firms tend to match asset ...

Download or read book Access to Long Term Debt and Effects on Firms Performance 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 Does the availability of long-term financing affect a firm's productivity (by facilitating access to more productive technologies) and capital accumulation? Or does the less intense monitoring and the lesser fear of liquidation associated with long-term debt actually reduce productivity? Recent theory increasingly emphasizes the association of short-term debt with higher-quality firms and better incentives. The possibility of premature liquidation, for example, may serve as a disciplinary device to improve firm performance. At the same time the role of long-term debt, especially when it is heavily subsidized, is being rethought because so many development banks are plagued with nonperforming loans and doubts about the selection criteria used in allocating funds. Jaramillo and Schiantarelli explore empirical evidence about the structure of debt maturity in Ecuadorean firms. They discuss how it has been affected by government intervention in credit markets, and by financial liberalization. Using firm-level panel data, they investigate the determinants of access to long-term debt in Ecuador. Finally, they provide evidence about how the maturity structure of debt affects firms' performance, particularly productivity and capital accumulation. They find that: * Long-term debt is very unevenly distributed. Almost 30 percent of firms never have access to it during the period studied. * Large firms are more likely to have access to long term debt than small firms. The former are on average more profitable. * Conditional on size, operating profits do not increase the probability of receiving long-term credit and may actually decrease it. This suggests that the mechanism used to allocate long-term resources in Ecuador may be flawed. * The allocation problem was worse for directed credit. There is some evidenct that, after financial liberalization, the problem was less severe. * There is a strong positive association between asset maturity and debt maturity, a matching of assets and liabilities. * Shorter-term loans are not conducive to greater productivity while long-term loans may lead to improvements in productivity. * While long-term loans may positively affect the quality of capital accumulation, they do not have an impact on the amount of fixed investment. 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 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 determinants and effects of firms performance evidence from the United Kingdon and Italy written by Fabio Schiantarelli and published by . This book was released on 1997 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Risk and the Corporate Structure of Banks written by International Monetary Fund and published by International Monetary Fund. This book was released on 2010-02-01 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: We identify different sources of risk as important determinants of banks' corporate structures when expanding into new markets. Subsidiary-based corporate structures benefit from greater protection against economic risk because of affiliate-level limited liability, but are more exposed to the risk of capital expropriation than are branches. Thus, branch-based structures are preferred to subsidiary-based structures when expropriation risk is high relative to economic risk, and vice versa. Greater cross-country risk correlation and more accurate pricing of risk by investors reduce the differences between the two structures. Furthermore, the corporate structure affects bank risk taking and affiliate size.

Download or read book Leverage Debt Maturity and Firm Investment written by Viet Anh Dang and published by . This book was released on 2010 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we examine the potential interactions of corporate financing and investment decisions in the presence of incentive problems. We develop a system-based approach to investigate the effects of growth opportunities on leverage and debt maturity as well as the effects of these financing decisions on firm investment. Using a panel of UK firms between 1996 and 2003, we find that high-growth firms control underinvestment incentives by reducing leverage but not by shortening debt maturity. There is a positive relation between leverage and debt maturity as predicted by the liquidity risk hypothesis. Leverage has a negative effect on firm investment levels, which is consistent with the overinvestment hypothesis regarding the disciplining role of leverage for firms with limited growth opportunities.

Download or read book The Determinants of Corporate Debt Maturity Structure written by Antonios Antoniou and published by . This book was released on 2004 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the determinants of corporate debt maturity structure decisions of French, German and UK firms using panel data. These countries are characterised by different financial systems and traditions that have implications on how firms decide their debt maturity structure. We apply several alternative estimation methods and show that in debt structure modelling endogeneity problem should be controlled for. We do so by using Generalised Method of Moments (GMM) estimation method. The GMM results suggest that firms in all three countries adjust their debt ratios to attain their target maturity structure. However, the speed at which firms adjust their maturity structure towards their target levels differs from one country to another. A direct association of debt maturity with leverage in all countries confirms the predictions of the liquidity risk argument. However, corporate tax rate, growth opportunities, liquidity, firm quality, earnings volatility, asset maturity and firm size have different degree and direction of effect on debt maturity across the sample countries. Apart from these firm-specific factors, we also find that the impact of market-related factors (term structure of interest rates, equity premium, share price performance, and interest rate volatility) on debt maturity is country dependent. Hence, the debt maturity structure of a firm is determined by both firm-specific factors and country-specific effects.