The determinants of cash flow sensitivity of cash: The family ownership effect

Lozano, María Belén; Yaman, Serhat

doi:10.1016/j.ribaf.2020.101204

Cited by 8 publications

(1 citation statement)

References 54 publications

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“…In addition, short-term debt mitigates asset substitution problem (Jensen and Meckling, 1976), since the firm needs to pay back its debt before any risky growth opportunity to be exercised (Barnea et al, 1980;Leland and Thoft, 1996). During a financial crisis uncertainty and cash flow volatility increases (Lozano and Yaman, 2020), which in turn make the asset substitution problem more severe resulting in increased agency costs. Thus, considering the moral hazard incentives of a borrower, lenders are reluctant to lend long-term in a high uncertainty environment.…”

Section: Optimal Debt Maturity and Financial Crisesmentioning

confidence: 99%

Adjustment Speed of Debt Maturity: Evidence From Financial Crises in East Asia

Tekin

Polat

2021

BEMP

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We investigate the change in adjustment speed of debt maturity for East Asian firms between 1990 and 2017 by including two exogenous shocks: the Asian Financial Crisis 1997-1998 (AFC) and the Global Financial Crisis 2007-2009 (GFC). We employ the least square dummy variable correction and find that East Asian firms have a slower adjustment of long-term debt over time. Besides, the decrease in adjustment speed of long-term debt after the GFC is more compared to the decrease after the AFC. Further analysis shows the optimal debt maturity differs across countries and industries. Another important implication of our results is that firms in high governance countries are more likely to close the gap between the actual and target debt maturity in time. Overall, debt holders and investors should consider financial uncertainties.

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Section: Optimal Debt Maturity and Financial Crisesmentioning

confidence: 99%