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Parameterizing Debt Maturity
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Book Synopsis Parameterizing Debt Maturity by : Mr. Philip Barrett
Download or read book Parameterizing Debt Maturity written by Mr. Philip Barrett and published by International Monetary Fund. This book was released on 2021-04-23 with total page 74 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines ways to summarize the maturity structure of public debts using a small number of parameters. We compile a novel dataset of all promised future payments for US and UK government debt from every month since 1869, and more recently for Peru, Poland, Egypt, and Nigeria. We show that there is a unique parametric form which does not arbitrarily restrict debt issuance – portfolios of bonds with exponential coupons. Compared to the most popular alternative, this form 1) more accurately describes changes in debt maturity for these six countries and 2) gives a quite different interpretation of historical debt maturity. Our work can be applied not just to analyze past debt movements, but – because parameter estimates are relatively similar across countries – also for monitoring changes in debt maturity, including in countries where data are partial or incomplete.
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 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 The Maturity Structure of Debt: Determinants and Effects on Firms' Performance: Evidence from the United Kingdom and Italy by : Fabio Schiantarelli
Download or read book The Maturity Structure of Debt: Determinants and Effects on Firms' Performance: Evidence from the United Kingdom and Italy written by Fabio Schiantarelli and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: January 1997 Firms tend to match assets with liabilities, and more profitable firms have more long-term debt. Long-term debt has a positive effect on firms' performance, but this is not true when a large fraction of that debt is subsidized. The authors empirically investigate the determinants and consequences of the maturity structure of debt, using data from a panel of UK and Italian firms. They find that in choosing a maturity structure for debt, firms tend to match assets and liabilities, as both conventional wisdom and some recent theoretical models suggest. They conclude that more profitable firms (as measured by the ratio of cash flow to capital) tend to have more long-term debt. This finding is consistent with the dominant role played by firms' fear of liquidation and loss of control associated with short-term debt. It may also reflect the willingness of financial markets to provide long-term finance only to quality firms. The data do not support the hypothesis that short-term debt, through better monitoring and control, boosts efficiency and growth -rather, the opposite can be concluded. In both countries, the data suggest a positive relationship between initial debt maturity and the firms' subsequent medium-term performance (i.e., profitability and growth in real sales). In both countries total factor productivity (TFP) depends positively on the length of debt maturity when the maturity variable is entered both contemporaneously and lagged. But in Italy the positive effect of the length of maturity on productivity is substantially reduced or even reversed when the proportion of subsidized credit increases. The authors document the relationship between firms' characteristics and their choice of shorter or long-term debt by estimating a maturity equation and interpreting the results in light of insights from theoretical literature, and by analyzing the effects of maturity on firms' later performance in terms of profitability, growth, and productivity; assess how TFP depends on the degree of leverage and the proportion of longer and shorter-term debt; and analyze the relationship between firms' debt maturity and investment. This paper--a product of the Finance and Private Sector Development Division, Policy Research Department--is part of a larger effort in the department to study the effects of financial structure on economic performance. The study was funded by the Bank's Research Support Budget under the research project Term Finance: Theory and Evidence (RPO 679-62).
Book Synopsis Optimal Maturity Structure of Sovereign Debt in Situation of Near Default by : Gabriel Desgranges
Download or read book Optimal Maturity Structure of Sovereign Debt in Situation of Near Default written by Gabriel Desgranges and published by International Monetary Fund. This book was released on 2014-09-12 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the relationship between default and the maturity structure of the debt portfolio of a Sovereign, under uncertainty. The Sovereign faces a trade-off between a future costly default and a high current fiscal effort. This results into a debt crisis in case a large initial issuance of long term debt is followed by a sequence of negative macro shocks. Prior uncertainty about future fundamentals is then a source of default through its effect on long term interest rates and the optimal debt issuance. Intuitively, the Sovereign chooses a portfolio implying a risk of default because this risk generates a correlation between the future value of long term debt and future fundamentals. Long term debt serves as a hedging instrument against the risk on fundamentals. When expected fundamentals are high, the Sovereign issues a large amount of long term debt, the expected default probability increases, and so does the long term interest rate.
Book Synopsis Debt Maturity and Firm Performance by : Fabio Schiantarelli
Download or read book Debt Maturity and Firm Performance written by Fabio Schiantarelli and published by . This book was released on 2016 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: Is long-term debt better than short-term debt in its effect on firm performance? The answer appears to be yes for privately owned companies in India.Economic policymakers traditionally hold the view that, because of imperfections in capital markets, a shortage of long-term finance acts as a barrier to industrial performance and growth. Long-term finance is thought to allow firms to invest in more productive technologies, even when they do not produce immediate payoffs, without the fear of premature liquidation. As a result, special state-supported term-lending institutions have been established, especially in developing countries.But some believe that short-term finance may offer better incentives because it allows suppliers of finance to monitor and control firms more effectively, thus improving the firms' performance.Schiantarelli and Srivastava empirically investigate the determinants and consequences of the term structure of debt. Using a rich panel of data on privately owned companies in India, they also examine the influence of debt maturity structures on those firms` performance, especially on productivity.The results are not conclusive, but seem to support conventional beliefs about the importance of long-term finance to firm performance. Heavy leveraging, however, has a strong negative impact on productivity.They base their econometric evidence on estimates of a maturity equation and of a production function augmented by financial variables.The data on which these results are based have been generated by a financial system in which there is little competition, in which state-owned financial institutions are not guided by the profit motive and have no control over interest rates, so one cannot say whether short term finance would have been more beneficial in a less regulated system.Moreover, by the end of the 1980s, the capital base of India's government-owned financial institutions had been severely eroded and they carried a heavy burden of nonperforming assets. This means that the benefits of long term finance must be weighed against the costs.This paper - a product of the Finance and Private Sector Development Division, Policy Research Department - was prepared for the conference Firm Finance: Theory and Evidence held on June 14, 1996. The study was funded by the Bank`s Research Support Budget under research project Term Finance (RPO 679-62).
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, 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:
Download or read book Debt Maturity written by Mr.Jun Il Kim and published by International Monetary Fund. This book was released on 2015-12-09 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines how debt maturity affects the debt limit, defined as the maximum amount of debt a government can afford without defaulting. We develop a model where investors are risk neutral, the primary balance is stochastic but exogenous, and default occurs solely due to the government’s inability to pay. We find that debt limit is higher for long-term debt. Underlying this finding is the intrinsic advantage of long-term debt to price in future upside potential in fiscal outcomes in its current price. Such advantage makes long-term debt effectively cheaper than short-term debt at the margin, and leads to a higher debt limit. Simulation results suggest that the effect of debt maturity on debt limit could be substantial—particularly, if fiscal outcomes are subject to large uncertainty.
Book Synopsis Debt Maturity and the Global Financial Architecture by : Olivier Jeanne
Download or read book Debt Maturity and the Global Financial Architecture written by Olivier Jeanne and published by . This book was released on 2000 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Corporate Debt Maturity Choice by : Lina I. Sharara-Taher
Download or read book The Corporate Debt Maturity Choice written by Lina I. Sharara-Taher and published by . This book was released on 1994 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Unlike the extensive literature on the more general topic of capital structure, empirical research in the corporate debt maturity area is still scant. Related studies had formulated theoretical justifications for the observed cross-sectional multiplicity of debt maturities without a parallel concern in empirical research and to date, little empirical work has been conducted to test those formulations. In this context, this paper makes a major contribution in that it attempts to explain how corporate debt maturity choice is determined. At the core of this study is a general multiple choice model that makes it possible to examine how the different hypotheses on debt maturity advanced thusfar determine that choice. Using an ordered model as opposed to a simple model had the advantage of capturing the segmentation in the debt maturity market while allowing a gain in efficiency for the parameter estimates. The results from this model lend strong support to the hypothesis that, overall, when choosing the maturity of a new debt, corporate managers seek to minimize the agency costs of debt in general, especially those from the incentive for wealth expropriation by investing in riskier projects than originally anticipated. The evidence is also consistent with the assumption that managers do commit themselves not to transfer wealth from bondholders to stockholders by attaching protective covenants to the newly issued debt. Finally, the model's classificatory ability is tested for meaningfulness by comparing it to the proportional chance model.
Book Synopsis A Theoretical and Empirical Investigation of Debt Maturity Timing and Yield Curve Slope Analysis by : William Charles Handork
Download or read book A Theoretical and Empirical Investigation of Debt Maturity Timing and Yield Curve Slope Analysis written by William Charles Handork and published by . This book was released on 1973 with total page 316 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Comparative-advantage Approach to Government Debt Maturity by : Robin Marc Greenwood
Download or read book A Comparative-advantage Approach to Government Debt Maturity written by Robin Marc Greenwood and published by . This book was released on 2010 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study optimal government debt maturity in a model where investors derive monetary services from holding riskless short-term securities. In a simple setting where the government is the only issuer of such riskless paper, it trades off the monetary premium associated with short-term debt against the refinancing risk implied by the need to roll over its debt more often. We then extend the model to allow private financial intermediaries to compete with the government in the provision of money-like claims. We argue that if there are negative externalities associated with private money creation, the government should tilt its issuance more towards short maturities. The idea is that the government may have a comparative advantage relative to the private sector in bearing refinancing risk, and hence should aim to partially crowd out the private sector's use of short-term debt.
Book Synopsis The Effect of Firm Debt Maturity Structure on Firm Value by : William Patrick Andrew
Download or read book The Effect of Firm Debt Maturity Structure on Firm Value written by William Patrick Andrew and published by . This book was released on 1988 with total page 171 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Determinants of Debt Maturity at Issuance by : Elyas Elyasiani
Download or read book The Determinants of Debt Maturity at Issuance written by Elyas Elyasiani and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the determinants of corporate debt maturity while taking into account the interdependent relation between maturity and leverage. We do this by estimating a simultaneous-equations model on debt maturity and leverage for a sample of bond-issuing firms. To compare with previous studies, we also estimate a single-equation model on debt maturity using OLS. We define debt maturity as either the maturity of bonds at issuance (incremental approach), or the percentage of a firm's total debt that matures in more than three years (balance-sheet approach). Corroborating the findings of many previous studies, our single-equation OLS results support the underinvestment hypothesis purporting that firms with greater growth opportunities have shorter-term debt. However, under the simultaneous-equations model, the negative relation between a firm's debt maturity and its growth opportunities ceases to hold. Instead, it is the leverage decision that is influenced by growth opportunities. This suggests that existing models may overestimate the effect of growth opportunities on debt maturity.
Book Synopsis Empirical Determinants of Corporate Debt Maturity Structure by : Mark Hoven Stohs
Download or read book Empirical Determinants of Corporate Debt Maturity Structure written by Mark Hoven Stohs and published by . This book was released on 1994 with total page 362 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Debt Burden and Debt Maturity by : Alessandro Missale
Download or read book The Debt Burden and Debt Maturity written by Alessandro Missale and published by . This book was released on 1991 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
