Stock liquidity and corporate debt maturity structure: Evidences from Indian firms

Nufazil Altaf Ahangar

Managerial and Decision Economics, 2021, vol. 42, issue 7, 1754-1764

Abstract: The study examines the relationship between stock liquidity and the firms' use of short‐term debt. In addition, this study examines the impact of agency costs on this relationship and also documents whether large shareholding acts as a transmission channel through which stock liquidity may influence the use of short‐term debt. The study is based on secondary financial data of non‐financial Indian companies obtained from Center for Monitoring of Indian Economy Prowess database, pertaining to a period of 18 years (2000–2018). This study employs two‐step generalized method of moments (GMM) techniques to arrive at results. Results of the study confirm that firms' use of short‐term debt is negatively associated with stock liquidity. Additionally, we found that this relation is more pronounced for firms subjected to severe agency problems. We also find that large shareholding acts as a transmission channel through which stock market liquidity may influence the use of short‐term debt.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:42:y:2021:i:7:p:1754-1764

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