Industry Structure and Corporate Debt Maturity

31 Pages Posted: 13 Jul 2010

See all articles by Otgontsetseg Erhemjamts

Otgontsetseg Erhemjamts

Bentley University - Department of Finance; Bentley University

Kartik Raman

Bentley University

Husayn K. Shahrur

Bentley University - Department of Finance

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Abstract

We examine how industry competition affects firms’ choice of short-term debt. We find that the percentage of short-term debt is positively related to industry concentration at low levels of concentration, and inversely related to industry concentration at higher levels of concentration. This nonlinear relation is stronger in industries where firms are either more homogeneous or compete more aggressively. Moreover, we find that firms with shorter-maturity debt are less aggressive than their rivals in the product market. The overall evidence suggests that although financial contracts alleviate agency problems, they exacerbate the risk of predation.

Suggested Citation

Erhemjamts, Otgontsetseg and Raman, Kartik and Shahrur, Husayn K., Industry Structure and Corporate Debt Maturity. Financial Review, Vol. 45, Issue 3, pp. 627-657, August 2010, Available at SSRN: https://ssrn.com/abstract=1639197 or http://dx.doi.org/10.1111/j.1540-6288.2010.00264.x

Otgontsetseg Erhemjamts (Contact Author)

Bentley University - Department of Finance ( email )

175 Forest Street
Waltham, MA 02154
United States
781-891-2823 (Phone)

Bentley University ( email )

175 Forest Street
Waltham, MA 02145
United States
781-891-2823 (Phone)
781-891-2896 (Fax)

Kartik Raman

Bentley University ( email )

175 Forest Street
Waltham, MA 02154
United States

Husayn K. Shahrur

Bentley University - Department of Finance ( email )

175 Forest Street
Waltham, MA 02154
United States

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