Debt Maturity, Risk, and Asymmetric Information
Allen N. Berger
University of South Carolina - Moore School of Business; Wharton Financial Institutions Center; Tilburg University - CentER
International Monetary Fund (IMF)
W. Scott Frame
Federal Reserve Bank of Atlanta
Nathan H. Miller
U.S. Department of Justice
We test the implications of Flannery's (1986) and Diamond's (1991) models concerning the effects of risk and asymmetric information in determining debt maturity, and we examine the overall importance of informational asymmetries in debt maturity choices. We employ data on over 6,000 commercial loans from 53 large U.S. banks. Our results for low-risk firms are consistent with the predictions of both theoretical models, but our findings for high-risk firms conflict with the predictions of Diamond's model and with much of the empirical literature. Our findings also suggest a strong quantitative role for asymmetric information in explaining debt maturity.
Number of Pages in PDF File: 41
Keywords: Debt maturity, risk, asymmetric information, banks, credit scoring
JEL Classification: G32, G38, G21working papers series
Date posted: August 24, 2004
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo1 in 0.344 seconds