On the Maturity of Incremental Corporate Debt Issues

Using a data source extensively researched in the equity IPO literature but not yet examined in the context of corporate debt maturity, we document the maturity of 10,617 corporate debt issues placed by U.S. corporations in public markets between January 1, 1983 and December 31, 1999. We investigate and test various theories from earlier studies regarding optimal debt maturity suggesting that debt maturity is influenced by signaling and asymmetric information, taxes, and agency problems. Our main finding is that firm quality is directly related to debt maturity. Although inconsistent with the signaling theory of debt, this finding does support the notion that risky firms are screened out of the long-term debt market