The Effects of Short-Term Liabilities on Profitability: The Case of Germany

Christopher Baum (), Dorothea Schäfer and Oleksandr Talavera

No 635, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: Using data from Germany this paper examines the direct effect of non-financial firms' use of short-term versus long-term liabilities. We develop a structural model of a firm's value maximization problem that predicts that profitability of the firm will change if firms alter their use of short-term versus long-term liabilities. We find that firms that rely more heavily on short-term liabilities are likely to be more profitable.

Keywords: profitability; short-term liabilities; maturity structure; capital structure (search for similar items in EconPapers)
JEL-codes: G32 G30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec
Date: 2006
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Related works:
Working Paper: The Effects of Short-Term Liabilities on Profitability: The Case of Germany (2007)
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