Why are US firms using more short-term debt?

Claudia Custodio, Miguel Ferreira () and Luís Laureano

Journal of Financial Economics, 2013, vol. 108, issue 1, 182-212

Abstract: We show that corporate use of long-term debt has decreased in the US over the past three decades and that this trend is heterogeneous across firms. The median percentage of debt maturing in more than 3 years decreased from 53% in 1976 to 6% in 2008 for the smallest firms but did not decrease for the largest firms. The decrease in debt maturity was generated by firms with higher information asymmetry and new firms issuing public equity in the 1980s and 1990s. Finally, we show that demand-side factors do not fully explain this trend and that public debt markets' supply-side factors play an important role. Our findings suggest that the shortening of debt maturity has increased the exposure of firms to credit and liquidity shocks.

Keywords: Corporate debt maturity; Information asymmetry; Agency costs; New listings; Supply effects (search for similar items in EconPapers)
JEL-codes: G20 G30 G32 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (171)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:108:y:2013:i:1:p:182-212

DOI: 10.1016/j.jfineco.2012.10.009

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