Asset Salability and Debt Maturity: Evidence from Nineteenth-Century American Railroads

Posted: 23 Mar 2009

Date Written: April 2009

Abstract

I investigate the effect of assets' liquidation values on capital structure by exploiting the diversity of track gauges in nineteenth-century American railroads. The abundance of track gauges limited the redeployability of rolling stock and tracks to potential users with similar track gauge. Moreover, potential demand for both rolling stock and tracks was further diminished when many railroads went under equity receiverships. I find that the potential demand for a railroad's rolling stock and tracks were significant determinants of debt maturity and the amount of debt that was issued by railroads. The results are consistent with liquidation values models of financial contracting and capital structure.

Keywords: G32, G33, L92, N21, N71

Suggested Citation

Benmelech, Efraim, Asset Salability and Debt Maturity: Evidence from Nineteenth-Century American Railroads (April 2009). The Review of Financial Studies, Vol. 22, Issue 4, pp. 1545-1584, 2009. Available at SSRN: https://ssrn.com/abstract=1365692 or http://dx.doi.org/hhn036

Efraim Benmelech (Contact Author)

Northwestern University - Kellogg School of Management ( email )

Evanston, IL 60208
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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