The Maturity Structure of Corporate Debt

TLDR

The study empirically examines determinants of corporate debt maturity. Evidence supports the contracting‑cost hypothesis, showing that firms with limited growth options, larger size, or regulation favor long‑term debt, while those with greater information asymmetry issue more short‑term debt, and taxes do not influence maturity.

Abstract

ABSTRACT We provide an empirical examination of the determinants of corporate debt maturity. Our evidence offers strong support for the contracting‐cost hypothesis. Firms that have few growth options, are large, or are regulated have more long‐term debt in their capital structure. We find little evidence that firms use the maturity structure of their debt to signal information to the market. The evidence is consistent, however, with the hypothesis that firms with larger information asymmetries issue more short‐term debt. We find no evidence that taxes affect debt maturity.