Debt maturity, risk, and asymmetric information
Allen Berger (),
Marco Espinosa-Vega (),
W Frame () and
Nathan H. Miller
No 2004-32, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta
We test the implications of Flannery?s (1986) and Diamond?s (1991) models concerning the effects of risk and asymmetric information in determining debt maturity, and we examine the overall importance of informational asymmetries in debt maturity choices. We employ data from more than 6,000 commercial loans from 53 large U.S. banks. Our results for low-risk firms are consistent with the predictions of both theoretical models, but our findings for high-risk firms conflict with the predictions of Diamond?s model and with much of the empirical literature. Our findings also suggest a strong quantitative role for asymmetric information in explaining debt maturity.
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Journal Article: Debt Maturity, Risk, and Asymmetric Information (2005)
Working Paper: Debt maturity, risk, and asymmetric information (2004)
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