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Debt maturity of Italian firms

Silvia Magri (silvia.magri@bancaditalia.it)

No 574, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: In this paper we test different theories on debt maturity that can be ascribed to either the demand or the supply side of the market. Firm risk, asymmetric information, agency costs are all aspects that should be considered in the analysis. We also include leverage in the firm decision process regarding debt maturity, relying on a simultaneous equations approach. Among Italian industrial firms, theories based on lenders using debt maturity to address information problems and default risk seem to have strong explanatory power. The demand side of the market appears to be less important in determining debt maturity. The role of the supply side of the market is confirmed when considering legal enforcement of loan contracts. Where legal enforcement is low, the negative consequences of asymmetric information are worse for lenders and this explains why they give more importance to asymmetric information proxies in determining debt maturity.

Keywords: corporate finance; debt maturity; legal enforcement (search for similar items in EconPapers)
JEL-codes: G32 K40 L14 (search for similar items in EconPapers)
Date: 2006-01
New Economics Papers: this item is included in nep-cfn, nep-fin and nep-law
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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