Short-term debt catering

Stefano Lugo

Journal of Corporate Finance, 2021, vol. 66, issue C

Abstract: Focusing on investments by US money market mutual funds (MMFs) in nonfinancial commercial paper, this study shows that the demand for corporate short-term securities by preferred-habitat investors is positively associated with the use of short-term debt by firms. Consistent results are found when using a longitudinal dataset with a monthly frequency and a firm-quarter panel dataset; instrumenting the demand by MMFs; measuring the demand by MMFs at the level of individual issuers; and exploiting an exogenous change in regulation for identification. These findings support the idea that corporations cater to investors' preferences in choosing their debt maturity structure.

Keywords: Debt maturity; Catering to investors; Clientele effects; Money market mutual funds; Commercial paper (search for similar items in EconPapers)
JEL-codes: G23 G30 G32 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:66:y:2021:i:c:s0929119920302613

DOI: 10.1016/j.jcorpfin.2020.101817

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