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http://ssrn.com/abstract=2184584
 
 

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Liquidity Management and Industry Interactions: Evidence from Debt Maturity Choices


Daniel R. Carvalho


USC Marshall School of Business

Lori Santikian


USC Marshall School of Business

December 15, 2012

Marshall School of Business Working Paper No. FBE 02.13

Abstract:     
This paper studies the debt maturity decisions of firms and provides evidence suggesting that firms in an industry manage their liquidity in an interdependent way. We find that higher industry cash flow volatility is associated with a smaller likelihood that firms have their long-term debt largely maturing at the same time as their industry peers. We provide evidence that this captures how firms time their debt maturity, as opposed to systematic differences in debt maturity structure. This effect is only important when peers’ debt level is significant, in industries with both specialized assets and greater competition, and is robust to identification based on cash flow correlations within an industry. Overall, our analysis suggests that, while choosing financial policies in an important set of industries, firms attempt to have greater liquidity in states of the world where industry peers are financially weaker.

Number of Pages in PDF File: 54

Keywords: Liquidity Management, Industry Interactions, Debt Maturity, Interdependence

JEL Classification: G30, G32, G33

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Date posted: December 3, 2012 ; Last revised: April 24, 2013

Suggested Citation

Carvalho, Daniel R. and Santikian, Lori, Liquidity Management and Industry Interactions: Evidence from Debt Maturity Choices (December 15, 2012). Marshall School of Business Working Paper No. FBE 02.13. Available at SSRN: http://ssrn.com/abstract=2184584 or http://dx.doi.org/10.2139/ssrn.2184584

Contact Information

Daniel R. Carvalho (Contact Author)
USC Marshall School of Business ( email )
Marshall School of Business
Los Angeles, CA 90089
United States
Lori Santikian
USC Marshall School of Business ( email )
701 Exposition Blvd
Los Angeles, CA 90089
United States
HOME PAGE: http://www-bcf.usc.edu/~santikia/
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