On Corporate Debt Maturity Strategies

Morris, J. R.

doi:10.2307/2326392

Cited by 41 publications

(31 citation statements)

References 6 publications

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“…In this model a preference for long-term debt arises for a different reason: for any given expected cost of debt service, long-term debt increases the probability that the stabilization will succeed. Our result is closer in spirit to a simple idea in the corporate finance literature; Morris (1976) describes how a debt maturity matching the life of a firm's asset minimizes the variance of cash flows and thus reduces the bankruptcy risk.…”

Section: Lengthening Debt Maturity To Minimize Refinancing Risksupporting

confidence: 62%

How is the Debt Managed? Learning from Fiscal Stabilizations

Missale

Giavazzi

Benigno

2002

Scandinavian J Economics

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This paper examines public debt management during episodes of fiscal stabilization when long–term interest rates are generally higher than governments’ expectations of future rates. We find that governments increase the share of fixed–rate long–term debt denominated in the domestic currency, the higher is the conditional volatility of short–term interest rates, the lower are long–term interest rates, and the stronger is the fall in long–term rates that follows the announcement of the stabilization program. This evidence suggests that governments tend to prefer long to short maturity debt because they are concerned about refinancing risk. However, when long–term rates are high relative to their expectations, they issue short maturity debt to minimize borrowing costs. JEL classification: E63; H63

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Section: Lengthening Debt Maturity To Minimize Refinancing Risksupporting

confidence: 62%

How is the Debt Managed? Learning from Fiscal Stabilizations

Missale

Giavazzi

Benigno

2002

Scandinavian J Economics

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“…term debt. The finding on tangibility of assets supports the argument by Morris (1976) according to which firms match the maturity of assets and liabilities. To reduce the probability of liquidity problems, firms with larger fixed assets need a longer maturity structure.…”

Section: A Firms' Characteristicssupporting

confidence: 75%

Globalization and Firms' Financing Choices: Evidence From Emerging Economies

Schmukler

Vesperoni

2001

IMF Working Papers

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This paper studies the relation between firm's financing choices and financial globalization. Using an East Asian and Latin American firm-level panel for the 1980s and 1990s, we study how leverage ratios, debt maturity structure, and sources of financing change when economies are liberalized and when firms access international capital markets. We find that debt-equity ratios do not increase after financial liberalization. Debt maturity shortens for the average firm when countries undertake financial liberalization.However, domestic firms that actually participate in international capital markets extend their debt maturity. Financial liberalization has less effects on firms from countries with more developed domestic financial systems. Leverage ratios increase during crises.

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“…Specifically, Morris (1976) established that firms have to match the maturity of assets and liabilities in order to ensure that cash flow generated by assets is sufficient to pay periodic debt payments. Myers (1977) also argues that a firm can reduce agency problems between shareholders and bondholders if it matches the maturity of its debt to the life of its assets.…”

Section: Asset Maturitymentioning

confidence: 99%