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Debt Maturity, Risk, and Asymmetric Information
Author:
Marco A Espinosa-Vega null

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Allen N. Berger null

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Mr. Nathan H. Miller null

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W. Scott Frame null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2005: Issue 201
Language:
English
Publication Date:
01 Oct 2005
DOI:
https://doi.org/10.5089/9781451862201.001
ISBN:
9781451862201
ISSN:
1018-5941
Pages:
41
Keywords:
WP; risk rating; short-term debt; debt maturity structure; small business
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund