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Why are U.S. Firms Using More Short-Term Debt?Claudia CustodioArizona State University - W. P. Carey School of Business Miguel A. FerreiraNova School of Business and Economics; European Corporate Governance Institute (ECGI) Luis LaureanoISCTE - Lisbon University Institute - School of Business June 19, 2012 Journal of Financial Economics (JFE), Forthcoming Abstract: We show that corporate use of long-term debt has decreased in the U.S. over the past three decades and that this trend is heterogeneous across firms. The median percentage of debt maturing in more than three years decreased from 53% in 1976 to 6% in 2008 for the smallest firms, but did not decrease for the largest firms. The decrease in debt maturity was generated by firms with higher information asymmetry and new firms issuing public equity in the 1980s and 1990s. Finally, we show that demand-side factors do not fully explain this trend and that public debt markets’ supply-side factors play an important role. Our findings suggest that the shortening of debt maturity has increased the exposure of firms to credit and liquidity shocks.
Number of Pages in PDF File: 63 Keywords: corporate debt maturity, information asymmetry, agency costs, new listings, supply effects JEL Classification: G20, G30, G32 Accepted Paper SeriesDate posted: June 19, 2012Suggested CitationContact Information
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