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Corporate Debt Maturity and the Real Effects of the 2007 Credit Crisis


Heitor Almeida


University of Illinois at Urbana-Champaign; National Bureau of Economic Research (NBER)

Murillo Campello


Cornell University; National Bureau of Economic Research (NBER)

Bruno A. Laranjeira


University of Illinois at Urbana-Champaign

Scott J. Weisbenner


University of Illinois at Urbana-Champaign - Department of Finance; National Bureau of Economic Research (NBER)

August 3, 2011


Abstract:     
We use the 2007 credit crisis to assess the effect of financial contracting on real corporate behavior. We identify heterogeneity in financial contracting at the onset of the crisis by exploring ex-ante variation in long-term debt maturity. Our empirical methodology uses an experiment-like design in which we control for observed and unobserved firm heterogeneity via a differences-in-differences matching estimator. We study whether firms with large portions of their long-term debt maturing right at the time of the crisis observe more pronounced outcomes than otherwise similar firms that need not refinance their debt during the crisis. Firms whose long-term debt was largely maturing right after the third quarter of 2007 reduced investment by 2.5% more (on a quarterly basis) than otherwise similar firms whose debt was scheduled to mature well after 2008. This relative decline in investment is statistically significant and economically large, representing approximately one-third of pre-crisis investment levels. A number of falsification and placebo tests confirm our inferences about the effect of credit supply shocks on corporate policies. For example, in the absence of a credit shock ("normal times"), the maturity composition of long-term debt has no effect on investment outcomes. Likewise, that maturity composition has no impact on investment when long-term debt is not a major source of funding for the firm.

Number of Pages in PDF File: 50

Keywords: Financial crisis, debt maturity, matching estimators, investment spending, financing constraints

JEL Classification: G31

working papers series


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Date posted: May 17, 2009 ; Last revised: September 15, 2011

Suggested Citation

Almeida, Heitor and Campello, Murillo and Laranjeira, Bruno A. and Weisbenner, Scott J., Corporate Debt Maturity and the Real Effects of the 2007 Credit Crisis (August 3, 2011). Available at SSRN: http://ssrn.com/abstract=1405505 or http://dx.doi.org/10.2139/ssrn.1405505

Contact Information

Heitor Almeida
University of Illinois at Urbana-Champaign ( email )
515 East Gregory Drive
4037 BIF
Champaign, IL 61820
United States
217-3332704 (Phone)
HOME PAGE: http://www.business.illinois.edu/FacultyProfile/faculty_profile.aspx?ID=11357
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Murillo Campello (Contact Author)
Cornell University ( email )
114 East Avenue
369 Sage Hall
Ithaca, NY 14853
United States
HOME PAGE: http://www.johnson.cornell.edu/Faculty-And-Research/Profile.aspx?id=mnc35

National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
Bruno A. Laranjeira
University of Illinois at Urbana-Champaign ( email )
1206 South Sixth Street
Champaign, IL 61820
United States
(217) 2443142 (Phone)
Scott J. Weisbenner
University of Illinois at Urbana-Champaign - Department of Finance ( email )
340 Wohlers Hall, MC-706
1206 S. Sixth Street
Champaign, IL 61820
United States
217-333-0872 (Phone)
217-244-9867 (Fax)
HOME PAGE: http://business.illinois.edu/weisbenn/
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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