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The Debt-Maturity Structure of Small Firms in a Creditor-Oriented Environment

Dries Heyman, M. Deloof () and Hubert Ooghe

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: Once a firm decides to issue debt, the characteristics of this debt instrument should be considered. One of the critical decisions involves debt maturity. Using a sample of 1091 Belgian small firms from 1996 until 2000, this study analyses the determinants of the corporate debt-maturity structure of small firms in a creditor-oriented system. Consistent with previous empirical evidence on large firms, the present results strongly support the maturity-matching principle. The hypothesis that firms with many growth opportunities will borrow on the short term as a response to the under-investment problem, is not supported. There is a clear relation between the credit worthiness of a firm and the debt-maturity structure. Firms with a better credit score borrow on the long term, whereas firms with a poor credit quality are apparently forced to borrow on the short term. This evidence contradicts the expected U-shaped relationship between credit worthiness and debt maturity. Size negatively influences debt maturity.

Keywords: debt maturity; capital structure; small firms (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2003-09
New Economics Papers: this item is included in nep-cfn, nep-ent and nep-rmg
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