Why are US firms using more short-term debt?

Cláudia Custódio, Miguel A. Ferreira, Luís Laureano

Research output: Contribution to journalArticle

83 Scopus citations

Abstract

We show that corporate use of long-term debt has decreased in the US over the past three decades and that this trend is heterogeneous across firms. The median percentage of debt maturing in more than 3 years decreased from 53% in 1976 to 6% in 2008 for the smallest firms but did not decrease for the largest firms. The decrease in debt maturity was generated by firms with higher information asymmetry and new firms issuing public equity in the 1980s and 1990s. Finally, we show that demand-side factors do not fully explain this trend and that public debt markets' supply-side factors play an important role. Our findings suggest that the shortening of debt maturity has increased the exposure of firms to credit and liquidity shocks.

Original languageEnglish (US)
Pages (from-to)182-212
Number of pages31
JournalJournal of Financial Economics
Volume108
Issue number1
DOIs
StatePublished - Apr 1 2013

Keywords

  • Agency costs
  • Corporate debt maturity
  • Information asymmetry
  • New listings
  • Supply effects

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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