Journal ArticleDOI
Debt Maturity and the Effects of Growth Opportunities and Liquidity Risk on Leverage
TLDR
In this paper, the authors test the hypothesis that short debt maturity attenuates the negative effect of growth opportunities on leverage and find strong support for an economically significant attenuation effect, which suggests that firms trade off the cost of underinvestment problems against the risk of liquidity risk when choosing short maturity.Abstract:
I test the hypothesis that short debt maturity attenuates the negative effect of growth opportunities on leverage. Using simultaneous equations with leverage and maturity endogenous, I find strong support for an economically significant attenuation effect. The negative effect of growth opportunities on leverage for firms with all shorter-term debt is less than one-sixth as large as the effect for firms with all longer-term debt. Short maturity also increases liquidity risk, however, which negatively affects leverage. The results suggest that firms trade off the cost of underinvestment problems against the cost of liquidity risk when choosing short maturity. Copyright 2003, Oxford University Press.read more
Citations
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Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches
TL;DR: In this article, the authors examine the different methods used in the literature and explain when the different approaches yield the same (and correct) standard errors and when they diverge, and give researchers guidance for their use.
Journal ArticleDOI
Regression Diagnostics: Identifying Influential Data and Sources of Collinearity
TL;DR: This chapter discusses Detecting Influential Observations and Outliers, a method for assessing Collinearity, and its applications in medicine and science.
Journal ArticleDOI
Partial Adjustment Toward Target Capital Structures
TL;DR: In this article, the authors consider the effect of share price changes on market-valued leverage and conclude that firms do have target capital structures, as opposed to market timing or pecking order considerations, which explains a majority of the observed changes in capital structure.
Journal ArticleDOI
Partial adjustment toward target capital structures
TL;DR: A more general, partial-adjustment model of firm leverage indicates that firms do have target capital structures as mentioned in this paper, and the typical firm closes about one-third of the gap between its actual and its target debt ratios each year.
Journal ArticleDOI
Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches
TL;DR: In this paper, the authors examine the different methods used in the literature and explain when the different standard errors yield the same (and correct) standard errors and when they diverge.
References
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Journal ArticleDOI
A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity
TL;DR: In this article, a parameter covariance matrix estimator which is consistent even when the disturbances of a linear regression model are heteroskedastic is presented, which does not depend on a formal model of the structure of the heteroSkewedness.
Posted Content
Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers
TL;DR: In this paper, the benefits of debt in reducing agency costs of free cash flows, how debt can substitute for dividends, why diversification programs are more likely to generate losses than takeovers or expansion in the same line of business or liquidationmotivated takeovers, and why the factors generating takeover activity in such diverse activities as broadcasting and tobacco are similar to those in oil.
Journal ArticleDOI
Risk, Return, and Equilibrium: Empirical Tests
Eugene F. Fama,James D. MacBeth +1 more
TL;DR: In this article, the relationship between average return and risk for New York Stock Exchange common stocks was tested using a two-parameter portfolio model and models of market equilibrium derived from the two parameter portfolio model.
Journal ArticleDOI
Corporate financing and investment decisions when firms have information that investors do not have
TL;DR: In this paper, a firm that must issue common stock to raise cash to undertake a valuable investment opportunity is considered, and an equilibrium model of the issue-invest decision is developed under these assumptions.
Journal ArticleDOI
Determinants of corporate borrowing
TL;DR: In this article, the authors predict that corporate borrowing is inversely related to the proportion of market value accounted for by real options and rationalize other aspects of corporate borrowing behavior, such as the practice of matching maturities of assets and debt liabilities.