Industry Structure and Corporate Debt Maturity

The Financial Review, Forthcoming

46 Pages Posted: 6 Mar 2010

See all articles by Otgontsetseg Erhemjamts

Otgontsetseg Erhemjamts

Bentley University - Department of Finance; Bentley University

Kartik Raman

Bentley University

Husayn K. Shahrur

Bentley University - Department of Finance

Date Written: March 3, 2010

Abstract

We examine how industry competition affects firms’ choice of short-term debt. We find that the percentage of short-term debt is positively related to industry concentration at low levels of concentration, and inversely related to industry concentration at higher levels of concentration. This non-linear relation is stronger in industries where firms are either more homogeneous or compete more aggressively. Moreover, we find that firms with shorter-maturity debt are less aggressive than their rivals in the product market. The overall evidence suggests that although financial contracts alleviate agency problems, they exacerbate the risk of predation.

Keywords: Industry Structure, Product Market Competition, Debt Maturity

JEL Classification: G32, L10

Suggested Citation

Erhemjamts, Otgontsetseg and Raman, Kartik and Shahrur, Husayn K., Industry Structure and Corporate Debt Maturity (March 3, 2010). The Financial Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1564386 or http://dx.doi.org/10.2139/ssrn.1564386

Otgontsetseg Erhemjamts (Contact Author)

Bentley University - Department of Finance ( email )

175 Forest Street
Waltham, MA 02154
United States
781-891-2823 (Phone)

Bentley University ( email )

175 Forest Street
Waltham, MA 02145
United States
781-891-2823 (Phone)
781-891-2896 (Fax)

Kartik Raman

Bentley University ( email )

175 Forest Street
Waltham, MA 02154
United States

Husayn K. Shahrur

Bentley University - Department of Finance ( email )

175 Forest Street
Waltham, MA 02154
United States

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