The influence of cash flow volatility on firm use of debt of different maturities or zero-debt: International evidence

Keefe, Michael O’Connor and Phoebe Huyen Nguyen

International Review of Economics & Finance, 2023, vol. 86, issue C, 684-700

Abstract: The empirical international literature on the relationship between firm cash flow volatility and debt maturity and zero-debt policy provides contradictory evidence. Using a large international sample, we find that cash flow volatility is positively associated with our measure of debt maturity at less than the 1% level of significance. Relative to unconditional means of debt maturity, a one standard deviation increase in cash flow volatility implies a 2.57% decrease in the probability of firms using long-term debt, a 5.83% increase in the probability of firms using only short-term debt and an 11.8% increase in the probability of firms using zero-debt. Overall, our results support the screening and the trade-off theories that firms with high cash flow volatility are screened out of the long-term debt market.

Keywords: Debt maturity; Zero debt; Cash flow volatility; Emerging markets; Developing economies; Advanced economies (search for similar items in EconPapers)
JEL-codes: G15 G32 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056023001065
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:86:y:2023:i:c:p:684-700

DOI: 10.1016/j.iref.2023.03.035

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().