Debt maturity, risk, and asymmetric information

Allen N. Berger (), Marco Espinosa-Vega (), W. Scott Frame and Nathan H. Miller

No 2004-32, Working Paper from Federal Reserve Bank of Atlanta

Abstract: We test the implications of Flannery’s (1986) and Diamond’s (1991) models concerning the effects of risk and asymmetric information in determining debt maturity, and we examine the overall importance of informational asymmetries in debt maturity choices. We employ data from more than 6,000 commercial loans from 53 large U.S. banks. Our results for low-risk firms are consistent with the predictions of both theoretical models, but our findings for high-risk firms conflict with the predictions of Diamond’s model and with much of the empirical literature. Our findings also suggest a strong quantitative role for asymmetric information in explaining debt maturity.

New Economics Papers: this item is included in nep-bec and nep-cfn
Date: 2004
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Related works:
Working Paper: Debt maturity, risk, and asymmetric information (2004)
Working Paper: Debt Maturity, Risk, and Asymmetric Information (2005)
Journal Article: Debt Maturity, Risk, and Asymmetric Information (2005)
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