Determinants of corporate debt maturity in South America: Do institutional quality and financial development matter?

Guilherme Kirch and Paulo Renato Soares Terra

Journal of Corporate Finance, 2012, vol. 18, issue 4, 980-993

Abstract: We test whether a country's level of financial development or institutional quality (or both) has a first‐order effect on corporate debt maturity decisions on a sample of 359 non-financial firms from five South American countries over a 12‐year period. We find that there is a substantial dynamic component in the determination of a firm's debt maturity, and firms face moderate adjustment frictions toward their optimal maturities. More importantly, the level of financial development does not influence debt maturity, whereas the institutional quality of a country has a significant positive effect on the level of long-term debt in a firm's financial structure. Our results support the hypothesis that the quality of national institutions is an important determinant of corporate financing in general and of debt maturity in particular.

Keywords: Debt maturity; Institutional quality; Financial development; Factor analysis; Dynamic panel data analysis; South America (search for similar items in EconPapers)
JEL-codes: E44 G32 G39 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (43)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:18:y:2012:i:4:p:980-993

DOI: 10.1016/j.jcorpfin.2012.05.004

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