Debt Maturity Choice of a Firm : Evidence from African Countries

This study aims to investigate how firm, industry, macroeconomic and institutional factors influence a firm's debt maturity structure decisions across nine African countries. We consider a sample of 986 non-financial firms over a period of 10 years (1999-2008). We specify panel data models that link firm, industry and country characteristics with debt maturity structure and apply a battery of econometric procedures to estimate the relationship between the variables. The evidence shows that: (i) the effects of conventional firm-specific factors on debt maturity structure are broadly consistent with mainstream debt maturity theory and empirical findings in similar studies; (ii) the debt maturity structure of sample firms is epitomized by inter-industry and cross-country heterogeneity; (iii) the income group to which a country belongs, in addition to its direct impact, indirectly influences debt maturity structure decisions of sample firms by enhancing or mitigating the impact of firm-specific factors on debt maturity structure; and (iv) while shareholder rights protection, creditor rights protection, stock market size and size of overall economy positively influence debt maturity structure of a firm, economic growth, taxation and relative size of banking sector have a negative influence. These findings signify the role that information asymmetry, agency and bankruptcy considerations, access to finance, and maturity-matching play in debt maturity decisions of firms in Africa