The Debt Maturity Structure of Small Firms in a Creditor Oriented Environment

26 Pages Posted: 25 Jun 2003

See all articles by Dries Heyman

Dries Heyman

Ghent University - Department of Financial Economics

Marc Deloof

University of Antwerp; University of Antwerp - Antwerp Management School

Hubert Ooghe

Vlerick Business School; Ghent University - Department of Accountancy and Corporate Finance

Date Written: May 2003

Abstract

Once a firm decides to issue debt, the characteristics of this debt instrument should be considered. One of the critical decisions involves the debt maturity. Using a sample of 1091 Belgian small firms from 1996 until 2000, we analyse the determinants of the corporate debt maturity structure of small firms in a creditor oriented system. Consistent with empirical evidence on large firms, our results strongly support the maturity matching principle. The hypothesis that firms with a lot of growth opportunities will borrow on short term as a response to the underinvestment problem, is not supported. There is a clear relation between the credit worthiness of a firm and the debt maturity structure: firms with a better credit score borrow on long term, whereas firms with a poor credit quality seem to be forced to borrow on short term. This evidence contradicts to the expected U-shaped relationship between credit worthiness and debt maturity. Size negatively influences debt maturity.

Note: Previously titled "The Debt Maturity Structure of Very Small Firms in a Banking Oriented System"

Keywords: debt maturity, capital structure, small firms

JEL Classification: G32

Suggested Citation

Heyman, Dries and Deloof, Marc and Ooghe, Hubert, The Debt Maturity Structure of Small Firms in a Creditor Oriented Environment (May 2003). Available at SSRN: https://ssrn.com/abstract=407720 or http://dx.doi.org/10.2139/ssrn.407720

Dries Heyman (Contact Author)

Ghent University - Department of Financial Economics ( email )

Ghent, 9000
Belgium
0032 (0)9 2645307 (Phone)
(0)9 2643577 (Fax)

Marc Deloof

University of Antwerp ( email )

Prinsstraat 13
Faculteit TEW
Antwerpen, 2000
Belgium
+32 3 265 41 69 (Phone)
+32 3 265 47 99 (Fax)

HOME PAGE: http://https://www.uantwerpen.be/en/staff/marc-deloof/

University of Antwerp - Antwerp Management School ( email )

Boogkeers 5
Antwerp, 2000
Belgium

Hubert Ooghe

Vlerick Business School ( email )

Reep 1
B-9000 Gent
Belgium

Ghent University - Department of Accountancy and Corporate Finance

Kuiperskaai 55 E
B-9000 Ghent
Belgium

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