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Debt Maturity Structure and Firm Investment
Author(s) -
Aivazian Varouj A.,
Ge Ying,
Qiu Jiaping
Publication year - 2005
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/j.1755-053x.2005.tb00120.x
Subject(s) - leverage (statistics) , endogeneity , debt , maturity (psychological) , monetary economics , investment (military) , debt ratio , capital structure , debt to capital ratio , business , economics , finance , econometrics , developmental psychology , politics , political science , law , return on equity , equity ratio , machine learning , computer science , stock exchange , psychology
This study shows that the maturity structure of a firm's debt has a significant impact on its investment decisions. We show, after controlling for the effect of the overall level of leverage, that a higher percentage of long‐term debt in total debt significantly reduces investment for firms with high growth opportunities. In contrast, the correlation between debt maturity and investment is not significant for firms with low growth opportunities. The results are strong at the firm level and at the business segment level. These results hold even after controlling for the endogeneity problem inherent in the relationship between total leverage, the maturity composition of leverage, and investment.