The Relation between Corporate and Government Debt Maturity in Europe

Stefano Lugo and Giulia Piccillo

Journal of Financial and Quantitative Analysis, 2019, vol. 54, issue 5, 2119-2140

Abstract: This article investigates the gap-filling explanation for corporate debt maturity choices in a multi-country setting. We argue that companies adjust their debt maturity in response to shocks in government debt maturity both at home and abroad; the difference between the two effects depends on the markets’ relative size and level of integration. Focusing on the European case and treating the Economic and Monetary Union as a shock in market integration, we find strong empirical support for our predictions. Our results have relevant implications for the opportunity for individual governments to use their debt maturity structure as a policy tool.

Date: 2019
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