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Why do firms borrow on a short-term basis ? Evidence from European countries

Valérie Oheix and Dorothée Rivaud-Danset

No 2009-14, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: This paper investigates empirically the use of short-term bank loans by firms. We face two analytical frameworks. According to the corporate finance theory, short-term and long-term ebts are substitutes, while in the credit channel literature they are distinct and complementary vehicles. We estimate a model that explains the level of short-term bank debt, using panel data from the BACH database for six European countries (1989-2003). Our results indicate that the two types of bank loans are complements. They show that short-term bank debt should be analysed as a specific vehicle that finances current assets, as in the credit channel literature.

Keywords: corporate short-term debt; debt maturity structure; credit channel (search for similar items in EconPapers)
JEL-codes: E51 G32 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2009
New Economics Papers: this item is included in nep-eec
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