A BEJTE Topics article.

Abstract

This paper focuses on the signalling role of debt maturity. The main novelty of the paper is that it analyzes a setting in which high quality firms use collateral as a complementary device along with debt maturity to signal their superiority. Model simulations suggest a non-monotonic relationship between firm quality and debt maturity, in which high quality firms have both long-term secured debt and short-term secured or non-secured debt and low quality firms have long-term unsecured debt. We provide some empirical evidence for this result based on debt contracts of the Asia Commercial Bank.

Submitted: February 12, 2006 · Accepted: July 28, 2006 · Published: December 4, 2006

Originally published in Topics in Theoretical Economics.

Recommended Citation

Lensink, Robert and Pham, Thi Thu Tra (2006) "On the Signalling Role of Debt Maturity," Topics in Theoretical Economics: Vol. 6 : Iss. 1, Article 18.
Available at: http://www.bepress.com/bejte/topics/vol6/iss1/art18