The impact of contract enforcement efficiency on debt maturity structure using mathematical derivation and comparative static analysis

2021 ◽  
pp. 1-12
Author(s):  
Yi Wu ◽  
Xiani Yang
Keyword(s):  
Debt Maturity ◽  
Contract Enforcement ◽  
Mathematical Methods ◽  
Debt Contracts ◽  
Mediating Role ◽  
Debt Maturity Structure ◽  
Comparative Static Analysis ◽  
Maturity Structure ◽  
The Impact ◽  
Mathematical Derivation

In recent years, the systematic use of advanced mathematical methods to express, study and argue economic theories has become an important branch and research hotspot in economics. The choice of debt maturity structure is an interesting economics issue in corporate finance. The signing of debt financing contract is not only the enterprises’ independent behavior, but also will be affected by the contract environment. Differences in the contractual environment will inevitably lead to differences in the efficiency of contract enforcement between borrowers and lenders in debt contracts. This paper introduces the contract enforcement efficiency factor on the basis of the standard structure model constructed by Holmstrom and Tirole, and then theoretically investigates the influence mechanism of contract enforcement efficiency on debt maturity structure based on the mediating role of contract enforcement efficiency on the investors’ liquidation claims. By transforming the financing contract into a linear programming problem, and then solving the optimization model, mathematical derivation and static comparative analysis, the research shows that as the efficiency of contract enforcement increases, the amount of short-term debt and long-term debt increases, while the direction change in debt maturity structure is uncertain and the specific relationship between them is closely related to the magnitude of all exogenous variables.

Does Stock Liquidity Affect Corporate Debt Maturity Structure?

2020 ◽  
pp. 2150005
Author(s):  
Joseph M. Marks ◽  
Chenguang Shang
Keyword(s):  
Stock Market ◽  
Debt Maturity ◽  
Market Liquidity ◽  
Stock Liquidity ◽  
Yield Spreads ◽  
Debt Maturity Structure ◽  
Bond Yield ◽  
Maturity Structure ◽  
Stock Market Liquidity ◽  
The Impact

We show an inverse relation between the use of short-term debt and stock market liquidity. This finding is robust to a battery of control variables, alternative measures of the key variables, and various identification strategies. A difference-in-difference (DiD) approach suggests that the relation between debt maturity structure and stock liquidity may be causal. The impact of stock liquidity on debt maturity is stronger in the presence of large institutional holdings and when borrowers are subject to greater refinancing risk. We also provide evidence that firms with liquid stock tend to issue longer-term bonds and enjoy lower bond yield spreads. Overall, our results support the view that the governance function of stock market liquidity reduces the necessity of debt market monitoring, which allows firms to shift toward longer-term debt to avoid the costs and risk of frequent refinancing.

Analyzing the impact of board vigilance on financial distress through the intervention of leverage structure and interaction of asset tangibility in the non-financial sector of Pakistan

2021 ◽  
pp. 2150004
Author(s):  
Wen Xuezhou ◽  
Rana Yassir Hussain ◽  
Haroon Hussain ◽  
Muhammad Saad ◽  
Sikander Ali Qalati
Keyword(s):  
Capital Structure ◽  
Financial Distress ◽  
Ordinary Least Squares ◽  
Debt Maturity ◽  
Financial Firms ◽  
Debt Maturity Structure ◽  
Maturity Structure ◽  
The Impact ◽  
The Relationship

This study focuses on the relationship between board vigilance and financial distress in non-financial firms listed on the Pakistan Stock Exchange (PSX). The mediating role of leverage structure and moderating role of asset tangibility is also studied following Baron and Kenney’s approach. The study analyzed the data of 284 firms ranging from 2013 to 2017 by using ordinary least squares (OLS) and panel corrected standard errors (PCSE) regressions. The study revealed that the debt maturity structure mediates the relationship between board independence and financial distress and between CEO non-duality and financial distress but the capital structure did not mediate any of the stated relationships. Similarly, asset tangibility negatively moderated the relationship between debt maturity and financial distress. However, there was no such moderation detected between the relationship of capital structure and financial distress. The results remained consistent throughout the analysis with both regression techniques. These results suggest using more long-term debt in debt maturity structure to have control over financial distress and also to reduce the reliance on non-productive tangible assets in the asset structure of non-financial firms of Pakistan.

scholarly journals The long-term horizon of family firms in M&A: The impact on research investments and debt maturity structure

2017 ◽  
Vol 15 (1) ◽  
pp. 108-122 ◽  
Author(s):  
Fabio Quarato
Keyword(s):  
Family Firms ◽  
Debt Maturity ◽  
Bank Debt ◽  
Growth Strategies ◽  
Debt Maturity Structure ◽  
Maturity Structure ◽  
Research Investments ◽  
The Impact ◽  
External Growth

Despite family business is the most widespread ownership structure worldwide, there is a lack of evidence on the impact of external growth strategies on their capital structure. Although most researches showed that the risk of losing control leads family firms to a lower level of debt, this article sheds new light on debt maturity structure and innovation investments when family firms embrace an acquisition path. In particular, I argue that family firms will use bank debt to a lower extent than nonfamily firms when they embrace an external growth strategy and, as a consequence, they are more likely to avoid cuts in research investments and focus more on long term debt. These hypotheses are consistent with agency theory arguments, as family principals exercise a more effective monitoring due to the larger ownership stake and the desire to pass the company on the offspring in profitable conditions. By having access to a panel data, I analyse acquisitions carried out in the period 2000-2013 by all Italian companies with turnover exceeding 50 million Euros, and the results support the long term perspective of family firms. In particular, family firms will use less bank debt to finance acquisitions, avoiding cutting research investments and relying on a more balanced debt maturity structure.

scholarly journals Debt maturity structure, institutional ownership and accounting conservatism

2019 ◽  
Vol 4 (1) ◽  
pp. 35-51 ◽  
Author(s):  
Mahdi Salehi ◽  
Mohsen Sehat
Keyword(s):  
Significant Relationship ◽  
Stock Exchange ◽  
Panel Data Analysis ◽  
Institutional Ownership ◽  
Debt Maturity ◽  
Accounting Conservatism ◽  
Content Type ◽  
Debt Maturity Structure ◽  
Maturity Structure ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of debt maturity structure and types of institutional ownership on accounting conservatism by using different financial variables and proxies. Design/methodology/approach Employing panel data analysis in the R programming language, the authors test their hypotheses on a sample of 143 (858 firm-year observations) companies listed on the Tehran Stock Exchange during 2011–2016. Findings Using Basu (1997) and Beaver and Ryan (2000) models as proxies for accounting conservatism, the findings suggest a non-significant relationship between accounting conservatism and debt maturity structure. Contrary to the primary expectation, the results indicate that short-maturity debts are also non-significantly and negatively associated with accounting conservatism in financially distressed firms. Finally, using both conservatism measures, the authors document that there is no significant relationship between both active and passive institutional ownership and accounting conservatism as well as debt maturity structure. Originality/value The current study is the first study conducted in a developing country like Iran, and the outcomes of the study may be helpful to other developing nations.

scholarly journals Debt maturity structure and firms’ performance: Evidence from Vietnam

2020 ◽  
Vol 6 (03) ◽  
Author(s):  
Hoang duc LE
Keyword(s):  
Positive Impact ◽  
Stock Exchange ◽  
Debt Maturity ◽  
Financial Firms ◽  
Debt Maturity Structure ◽  
Maturity Structure ◽  
Generalized Methods Of Moments ◽  
Methods Of Moments ◽  
The Impact

This paper investigates the impact of debt maturity structure on firms’ performance for all non-financial firms listed on Ho Chi Minh City Stock Exchange and Hanoi Stock Exchange between 2010 and 2017. We find that an increase in the ratio of long-term debt over total debt is associated with a decrease in firms’ performance. We also show that long-term debt financing can lead to a reduction in firms’ performance because it dampens the positive impact of the investment on firms’ performance. Our results are robust when we employ a System Generalized Methods of Moments to deal with endogeneity problems.

International Diversification, SFAS 131, and Debt Maturity Structure

2018 ◽  
Vol 35 (2) ◽  
pp. 438-468 ◽  
Author(s):  
Changjiang Wang
Keyword(s):  
International Diversification ◽  
Debt Maturity ◽  
Financial Accounting ◽  
Debt Maturity Structure ◽  
Sfas 131 ◽  
Maturity Structure ◽  
Geographic Segment Disclosures ◽  
Segment Disclosures ◽  
Diversified Firms ◽  
The Impact

This study examines the impact of geographic segment disclosures under the Statement of Financial Accounting Standards No. 131 (SFAS 131) on the debt maturity structure of internationally diversified firms. I find that the proportion of short-maturity debt increases with a firm’s international diversification. Moreover, the implementation of SFAS 131 attenuates the positive relation between international diversification and short-maturity debt. This attenuation effect is more pronounced for firms that continue to disclose geographic segment earnings in the post-SFAS 131 period than firms that do not. As short-maturity debt subjects firms to refinancing and potential costly liquidation risks, these results suggest a beneficial role of SFAS 131 in reducing firms’ reliance on short-maturity debt to address information asymmetry and agency costs of debt arising from international diversification. Furthermore, this study suggests that enhanced mandatory disclosure has a real effect on firms’ financing activities and capital structure.

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