Why are U.S. Firms Using More Short-Term Debt?

We show that corporate use of long-term debt has decreased in the U.S. over the past three decades and that this trend is heterogeneous across firms. The median percentage of debt maturing in more than three years decreased from 53% in 1976 to 6% in 2008 for the smallest firms, but did not decrease for the largest firms. The decrease in debt maturity was generated by firms with higher information asymmetry and new firms issuing public equity in the 1980s and 1990s. Finally, we show that demand-side factors do not fully explain this trend and that public debt markets' supply-side factors play an important role. Our findings suggest that the shortening of debt maturity has increased the exposure of firms to credit and liquidity shocks