The debt-maturity structure of small firms in a creditor-oriented environment

Dries Heyman, Marc Deloof and Hubert Ooghe

Vlerick Leuven Gent Management School Working Paper Series from Vlerick Leuven Gent Management School

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 s ystem. 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: 32 pages
Date: 2003-09-18
New Economics Papers: this item is included in nep-cfn and nep-ent
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Related works:
Working Paper: The Debt-Maturity Structure of Small Firms in a Creditor-Oriented Environment (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:vlg:vlgwps:2003-24

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