Corporate debt maturity and future firm performance volatility

Sato, M and Vithessonthi, C 2019, 'Corporate debt maturity and future firm performance volatility', International Review of Economics and Finance, vol. 60, pp. 216-237.


Document type: Journal Article
Collection: Journal Articles

Title Corporate debt maturity and future firm performance volatility
Author(s) Sato, M
Vithessonthi, C
Year 2019
Journal name International Review of Economics and Finance
Volume number 60
Start page 216
End page 237
Total pages 22
Publisher Elsevier BV
Abstract We propose a simple idea that corporate debt maturity should serve as a good indicator of future firm performance volatility. We show in a simple two-period model that the riskiness of corporate investment is a decreasing function of corporate debt maturity. If "observable" corporate debt maturity and ex ante "unobservable" corporate risk-taking is highly correlated, corporate debt maturity should be highly correlated with "ex post" realized firm performance volatility in following years. Using data on firms in 10 developing and developed countries during 1991-2013, we find that corporate debt maturity is negatively associated with future firm operating performance volatility but is not associated with future firm value volatility.
Subject Financial Economics
Finance
Financial Institutions (incl. Banking)
Keyword(s) Debt maturity Firm performance volatility Firm value volatility Investment Risk-taking
DOI - identifier 10.1016/j.iref.2018.11.001
Copyright notice © 2018 Elsevier Inc.
ISSN 1059-0560
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