Debt Maturity Structure and Firm Investment

14 Pages Posted: 13 Dec 2005

See all articles by Varouj A. Aivazian

Varouj A. Aivazian

University of Toronto - Rotman School of Management

Ying Ge

University of International Business and Economics

Jiaping Qiu

McMaster University - Michael G. DeGroote School of Business

Abstract

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.

Suggested Citation

Aivazian, Varouj A. and Ge, Ying and Qiu, Jiaping, Debt Maturity Structure and Firm Investment. Financial Management, Vol. 34, No. 4, Winter 2005, Available at SSRN: https://ssrn.com/abstract=869635

Varouj A. Aivazian (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Department of Economics
Toronto, Ontario M5S 3E6
Canada
416-978-2375 (Phone)
416-978-5433 (Fax)

Ying Ge

University of International Business and Economics ( email )

10 East Huixin Street
Chaouang District
Beijing, 100029
China

Jiaping Qiu

McMaster University - Michael G. DeGroote School of Business ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

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