An Empirical Analysis of Corporate Debt Maturity Structure

This paper provides an empirical examination of the determinants of corporate debt maturity structure. A partial adjustment model is estimated by GMM estimation procedure using data for an unbalanced panel of UK firms over the period 1983-1996. The evidence is consistent with the hypothesis that firms with more growth opportunities in their investment sets tend to have more shorter-term debt. There is also strong evidence for a positive impact of size on debt maturity structure. The results also provide strong support for the maturity-matching hypothesis that firms match the maturity structure of their debt to that of their assets. The findings are inconsistent with the signalling hypothesis that firms use their debt maturity structure to signal information to the market. We find no evidence that taxes affect debt maturity structure. Our results suggest that firms have long-term target ratios and they adjust to the target ratio relatively fast, which might suggest that the costs of being away from their target debt maturity ratios are significant