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Debt Maturity, Risk, and Asymmetric Information

We test the implications of Flannery's (1986) and Diamond's (1991) models concerning the effects of risk and asymmetric information in determining debt maturity, and we examine the overall importance of informational asymmetries in debt maturity choices. We employ data on over 6,000 commer...

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Bibliographic Details
Main Author: Espinosa-Vega, Marco
Other Authors: Berger, Allen, Miller, Nathan, Frame, W. Scott
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2005
Series:IMF Working Papers
Subjects:
Depository Institutions
Credit
Small Business
Banks
Finance
Banks And Banking
Industries: Financial Services
Monetary Economics
Ownership & Organization Of Enterprises
Monetary Policy, Central Banking, And The Supply Of Money And Credit: General
Micro Finance Institutions
Small And Medium Enterprises
Corporate Finance And Governance: General
Mortgages
Corporate Finance
Loans
Bank Credit
Banking
Money And Monetary Policy
United States
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:We test the implications of Flannery's (1986) and Diamond's (1991) models concerning the effects of risk and asymmetric information in determining debt maturity, and we examine the overall importance of informational asymmetries in debt maturity choices. We employ data on over 6,000 commercial loans from 53 large U.S. banks. Our results for low-risk firms are consistent with the predictions of both theoretical models, but our findings for high-risk firms conflict with the predictions of Diamond's model and with much of the empirical literature. Our findings also suggest a strong quantitative role for asymmetric information in explaining debt maturity
Physical Description:41 pages
ISBN:9781451862201

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