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Debt Maturity And Asymmetric Information
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Book Synopsis Debt Maturity, Risk, and Asymmetric Information by : Marco Espinosa-Vega
Download or read book Debt Maturity, Risk, and Asymmetric Information written by Marco Espinosa-Vega and published by INTERNATIONAL MONETARY FUND. This book was released on 2005-10-01 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We test the implications of Flannery's (1986) and Diamond's (1991) models concerning the effects of risk and asymmetric information in determining debt maturity, and we examine the overall importance of informational asymmetries in debt maturity choices. We employ data on over 6,000 commercial loans from 53 large U.S. banks. Our results for low-risk firms are consistent with the predictions of both theoretical models, but our findings for high-risk firms conflict with the predictions of Diamond's model and with much of the empirical literature. Our findings also suggest a strong quantitative role for asymmetric information in explaining debt maturity.
Book Synopsis Debt Maturity, Risk, and Asymmetric Information by :
Download or read book Debt Maturity, Risk, and Asymmetric Information written by and published by . This book was released on 2004 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: "We test the implications of Flannery's (1986) and Diamond's (1991) models concerning the effects of risk and asymmetric information in determining debt maturity, and we examine the overall importance of informational asymmetries in debt maturity choices. We employ data on over 6,000 commercial loans from 53 large U.S. banks. Our results for low-risk firms are consistent with the predictions of both theoretical models, but our findings for high-risk firms conflict with the predictions of Diamond's model and with much of the empirical literature. Our findings also suggest a strong quantitative role for asymmetric information in explaining debt maturity"--Abstract.
Book Synopsis Debt Maturity and Asymmetric Information by : Vidhan K. Goyal
Download or read book Debt Maturity and Asymmetric Information written by Vidhan K. Goyal and published by . This book was released on 2014 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: Asymmetric information models suggest that a borrower's choice of debt maturity depends on its private information about its default probabilities, i.e., borrowers with favorable information prefer short-term debt while those with unfavorable information prefer long-term debt. We test this implication by tracing the evolution of debt issuers' default risk following debt issuances. We find that short-term debt issuance leads to a decline in borrowers' asset volatility and an increase in their distance-to-default. The opposite is true for long-term debt issues. The results suggest that borrowers' private information about their default risk is an important determinant of their debt maturity choices.
Book Synopsis Credit Information Quality and Corporate Debt Maturity by : Marco Sorge
Download or read book Credit Information Quality and Corporate Debt Maturity written by Marco Sorge and published by World Bank Publications. This book was released on 2007 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides new theoretical and empirical evidence suggesting that the quality of credit information may be a key element in explaining the maturity structure of corporate debt around the world. In markets with poor credit information and hence a high degree of uncertainty about borrower quality, the authors find suboptimal equilibria in which short-term contracts are preferred either as a hedge against uncertainty to limit losses in bad states (in the symmetric information case) or as a screening device to learn about borrower credit quality in the course of a repeated lending relationship (in the asymmetric information case). The results of the model are supported by the econometric analysis of panel data from both industrial and developing economies. The authors find that countries with better quality of credit information (for example, as a result of improvements in credit reporting systems or accounting standards) are characterized by a higher share of long-term debt as a proportion of total corporate debt ceteris paribus. The findings suggest that promoting institutions and policies to improve the quality of credit information is an important prerequisite for increasing access of firms to long-term finance.
Book Synopsis Sovereign Debt Maturity Structure Under Asymmetric Information by : Diego J. Perez
Download or read book Sovereign Debt Maturity Structure Under Asymmetric Information written by Diego J. Perez and published by . This book was released on 2013 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Collateral and the Debt Maturity Choice Under Asymmetric Information by : Robert Lensink
Download or read book Collateral and the Debt Maturity Choice Under Asymmetric Information written by Robert Lensink and published by . This book was released on 2008 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the choice of signaling mechanisms by firms in a loan arrangement with banks. In a world of asymmetric information, firms have several debt instruments and hence can use them simultaneously to self-select. It is shown that different separating equilibria may result for self-selection. If separation occurs, low-quality firms will always borrow long-term debt without collateral, while high-quality firms will borrow long-term debt with collateral or borrow short-term debt with or without collateral. The optimal loan policy depends on the relative signaling costs of the different signaling mechanisms. Separation will be more likely if the proportion of low-quality firms in the market is higher.
Book Synopsis Is Debt Maturity Determined by Asymmetric Information About Short-Term or Long-Term Earnings? by : Petra Danisevska
Download or read book Is Debt Maturity Determined by Asymmetric Information About Short-Term or Long-Term Earnings? written by Petra Danisevska and published by . This book was released on 2002 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper empirically examines the effect of asymmetric information between managers and lenders on debt maturity structure of firms. The measures of short and long-term asymmetric information are derived from the dispersion of analysts' earnings forecasts. Short-term information asymmetry positively affects debt maturity. We find no relation between long-term asymmetric information and debt maturity. Goswami, Noe and Rebello (1995) suggest that optimal debt maturity structure depends on the term structure of asymmetric information. Our results provide no support for this model. Next, we focus on short-term asymmetric information. The findings imply that firms with both good news and high short-term asymmetric information rely significantly more on short-term debt. Further, a higher proportion of collateral in informational problematic firms leads to higher debt maturity. The maturity matching is strongly supported.
Book Synopsis The Maturity Structure of Debt by : Fabio Schiantarelli
Download or read book The Maturity Structure of Debt written by Fabio Schiantarelli and published by World Bank Publications. This book was released on 1997 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Debt Maturity, a Survey by : S. Abraham Ravid
Download or read book Debt Maturity, a Survey written by S. Abraham Ravid and published by . This book was released on 1996 with total page 78 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Asset Maturity, Debt Covenants, and Debt Maturity Choice by : Gautam Goswami
Download or read book Asset Maturity, Debt Covenants, and Debt Maturity Choice written by Gautam Goswami and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The existing research on debt-maturity under asymmetric information has focused on the impact of differential information regarding asset quality on the debt maturity decision. This research has generally indicated the optimality of short-term debt financing as a vehicle of mitigating the adverse selection problem. In this paper, we consider the impact of information asymmetry regarding the maturity structure of cash flows on the debt maturity decision. We demonstrate that, in this context, long-term debt is generally the form of debt financing most effective in alleviating the adverse selection problem. We also show that costs of adverse selection may induce some mismatching of debt maturity and asset maturity in the presence of significant transaction costs.
Book Synopsis Debt Financing Under Asymmetric Information by : Gautam Goswami
Download or read book Debt Financing Under Asymmetric Information written by Gautam Goswami and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we analyze the optimal design of debt- maturity, coupon payments, and dividend payout restrictions under asymmetric information. In our model, if the asymmetry of information is concentrated around long-term cash flows, firms finance with coupon-bearing long-term debt that partially restricts dividend payments. If the asymmetry of information is concentrated around near-term cash flows and there exists a significant possibility that they will be unable to refinance short-term debt, firms finance with coupon-bearing long-term debt that does not restrict dividend payments. Finally, if the asymmetry of information is uniformly distributed across dates, firms finance with short-term debt. Thus, it is the distribution of informational asymmetry across dates rather than the degree of information asymmetry per se that determines firms' debt-financing policies.
Book Synopsis The Debt Maturity Structure of Small Firms by : Frederick C. Scherr
Download or read book The Debt Maturity Structure of Small Firms written by Frederick C. Scherr and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Small firms differ from large firms in taxability, ownership, flexibility, industry, economies of scale, financial market access, and level of information asymmetry. We investigate the determinants of small firms' choice of the maturity structure of debt. We find that small firms' maturity of assets, capital structure, and probability of default are statistically and economically important in the choice of debt maturity. We find little evidence that small firms' growth options, level of asymmetric information, and tax status affect debt maturity choice.
Book Synopsis The Short-Term Debt Choice Under Asymmetric Information by : David Abad
Download or read book The Short-Term Debt Choice Under Asymmetric Information written by David Abad and published by . This book was released on 2017 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates whether the market level of information asymmetry affects firms' debt financing decisions. Using a sample of non-financial listed firms and a composite index based on microstructure measures of information asymmetry, we find that firms with more information asymmetry use shorter debt maturities. In addition, we find that these firms face more difficulties to access public debt and bank debt (particularly, short-term bank debt), and they have to rely on trade credit as an alternative source of short-term financing. Analyzing the associations in two subsamples based on firm size, we find that our results essentially driven by smaller companies, which are those affected by higher information asymmetries. Our findings support the information asymmetry theories of trade credit: as information asymmetry increases and, consequently, listed firms face more constraints in the credit markets, they increase the use of financing provided by their suppliers.
Book Synopsis The Role of Long Term Finance by : Gerard Caprio
Download or read book The Role of Long Term Finance written by Gerard Caprio and published by World Bank Publications. This book was released on 1997 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Debt Maturity and the Use of Short-Term Debt by : Sophia Chen
Download or read book Debt Maturity and the Use of Short-Term Debt written by Sophia Chen and published by International Monetary Fund. This book was released on 2019-02-05 with total page 77 pages. Available in PDF, EPUB and Kindle. Book excerpt: The maturity structure of debt can have financial and real consequences. Short-term debt exposes borrowers to rollover risk (where the terms of financing are renegotiated to the detriment of the borrower) and is associated with financial crises. Moreover, debt maturity can have an impact on the ability of firms to undertake long-term productive investments and, as a result, affect economic activity. The aim of this paper is to examine the evolution and determinants of debt maturity and to characterize differences across countries.
Book Synopsis Asymmetric Information, Dispersion of Debt Maturity and Syndicated Loan Costs- Case of United Kingdom by : 來南俊
Download or read book Asymmetric Information, Dispersion of Debt Maturity and Syndicated Loan Costs- Case of United Kingdom written by 來南俊 and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Credit Information Quality and Corporate Debt Maturity by : Marco Sorge
Download or read book Credit Information Quality and Corporate Debt Maturity written by Marco Sorge and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides new theoretical and empirical evidence suggesting that the quality of credit information may be a key element in explaining the maturity structure of corporate debt around the world. In markets with poor credit information and hence a high degree of uncertainty about borrower quality, the authors find suboptimal equilibria in which short-term contracts are preferred either as a hedge against uncertainty to limit losses in bad states (in the symmetric information case) or as a screening device to learn about borrower credit quality in the course of a repeated lending relationship (in the asymmetric information case). The results of the model are supported by the econometric analysis of panel data from both industrial and developing economies. The authors find that countries with better quality of credit information (for example, as a result of improvements in credit reporting systems or accounting standards) are characterized by a higher share of long-term debt as a proportion of total corporate debt ceteris paribus. The findings suggest that promoting institutions and policies to improve the quality of credit information is an important prerequisite for increasing access of firms to long-term finance.
