Debt maturity and the cost of bank loans

Wang, Chih Wei; Chiu, Wan-Chien; King, Tao Hsien Dolly

doi:10.1016/j.jbankfin.2017.10.008

Cited by 49 publications

(24 citation statements)

References 39 publications

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“…They suggested that the rollover risk and other operational losses enhance the default risk due to the presence of high financial friction and fair debt pricing. Wang et al [2020] confirmed the rollover risk hypothesis in US-based firms. They explained that an increase in short-term debt causes an increase in the cost of debt and credit risk eventually.…”

Section: Debt Maturity and Insolvency Risksupporting

confidence: 67%

Corporate board vigilance and insolvency risk: a mediated moderation model of debt maturity and fixed collaterals

Hussain

Wen

Saad

2021

International Journal of Management and Economics

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Studies indicate that a consistent rise in insolvency risk should be addressed at the strategic level. Vigilant boards can use leverage maturity structure as a tool to control insolvency risk. However, according to the information asymmetry theory, leverage acquisition is subject to the presence of fixed assets which can be used as collateral. The current study focuses on the relationship between board vigilance and insolvency risk, mediated by debt maturity and moderated by fixed collaterals in Pakistan based non-financial firms. A data set of 284 firms is constructed between the years 2013 and 2017. Hierarchical multiple regression analysis is used to test the proposed hypothesis using ordinary least squares (OLS) and panel corrected standard errors (PCSE) regression estimators. The results indicate that debt maturity mediates the relationship between board vigilance and insolvency risk. New information is generated about the fixed collaterals, and these negatively moderate the relationship between leverage maturity and emerging market z-score indicating inefficiency in the usage of fixed assets as collaterals. These results are robust to both regression techniques confirming that the non-productive fixed collaterals overshadow the positives of tangible assets in asset structure.

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Section: Debt Maturity and Insolvency Risksupporting

confidence: 67%

Corporate board vigilance and insolvency risk: a mediated moderation model of debt maturity and fixed collaterals

Hussain

Wen

Saad

2021

International Journal of Management and Economics

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“…When considering the relationship between financial structure and economic features, the financial expenses reimbursement capacity with the operating activity was found significant (Wang et al , 2020), while the index measuring the firm capability to repay financial debts using core business resources (Magli et al , 2018) did not gain any importance in the new model.…”

Section: Discussionmentioning

confidence: 96%

“…In addition, EBITDA is an acceptable approximation of financial resources generated by a firm through its operating activity, which is helpful for financial debt repayments. The firm's capability to service debt can be measured using interest coverage ratio (Mella and Navaroni, 2012; Wang et al , 2020).…”

Section: Theoretical Backgroundmentioning

confidence: 99%

Factors driving indebtedness among small- and medium-sized dairy companies

Mazzoleni

Pollonini²

2020

BFJ

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PurposeWe developed a model to demonstrate how multiple interrelated aspects of a firm influence its recourse to third-party financing, which frequently depends on the characteristics of each food production chain.Design/methodology/approachWe conducted an empirical research on a relevant sample of small- and medium-sized Italian dairy firms. Our research methodology is inspired by the grounded theory (Glaser and Strauss, 1967).FindingsOur findings illustrated that firm indebtedness is the result of intertwined variables, linked to different firm dimensions, including growth, financial structure and economic dynamics.Research limitations/implicationsA portion of the analysed phenomenon is not explained using the sample and econometric tools.Practical implicationsThere are practical implications for the decision-makers in a firm (in particular, the managers and the shareholders) as the model allows to evaluate the influence of a set of mutually interdependent firm variables for the indebtedness level.Originality/valueFirst, we considered the recourse to third-party financing within the context of the systems theory (Millová and Blatný, 2015) and from the perspective of linked causes and mutually connected variables. Second, our research focussed on a well-defined food chain and on features of firms operating in this context. Last, our model considered the impact of the recent economic crisis, which motivated us to review the existing models.

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“…We assign numbers to bond ratings corresponding to rate levels, as follows: AAA‐rated bonds are 5, AA+‐rated bonds are 4, AA‐rated bonds are 3, AA‐rated bonds are 2, and A+‐rated bonds are 1. Debt maturity is an important factor affecting debt risk (Wang, Chiu, & King, ). In this paper, Maturity is measured as the logarithm months of the bonds.…”

Section: Methodsmentioning

confidence: 99%

Do social ties matter for corporate bond yield spreads? Evidence from China

Qiu

Xiao

2019

Corporate Governance

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Research Question/Issue: This paper studies the effect of top management team (TMT) network centrality on corporate bond yield spreads. In additional analyses, we examine the hierarchical structures of TMT and study which parts contribute to the decrease in bond yield spreads. We also examine the mediating roles (including informed trading probability, media coverage, political ties, financial ties, and bond ratings) and the moderating roles (including marketization and analysts following) in the correlation between TMT network centrality and corporate bond yield spreads.Research Findings/Insights: This paper finds that firms with high TMT network centrality are significantly negatively correlated with lower bond yield spreads. The findings are robust after controlling for a series of sensitivity checks and endogenous concerns. The results of the hierarchical structures show that the decrease of bond spreads is accounted for CFOs' networks and board members' networks, whereas the role of CEOs' networks is not apparent. More importantly, after controlling CEOs'

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Debt maturity and the cost of bank loans

Cited by 49 publications

References 39 publications

Corporate board vigilance and insolvency risk: a mediated moderation model of debt maturity and fixed collaterals

Corporate board vigilance and insolvency risk: a mediated moderation model of debt maturity and fixed collaterals

Factors driving indebtedness among small- and medium-sized dairy companies

Do social ties matter for corporate bond yield spreads? Evidence from China

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