Firm structure and corporate debt maturity

Toh, Clifton (2012). Firm structure and corporate debt maturity Honours Thesis, UQ Business School, The University of Queensland.

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Clifton_Toh_41865145_BCom_Hons.pdf Honours Thesis application/pdf 1.13MB 18
Author Toh, Clifton
Thesis Title Firm structure and corporate debt maturity
School, Centre or Institute UQ Business School
Institution The University of Queensland
Publication date 2012-10
Thesis type Honours Thesis
Supervisor Kelvin Tan
Total pages 94
Language eng
Subjects 1502 Banking, Finance and Investment
Formatted abstract
This thesis examines whether or the extent to which diversified firms (firms with more segments) borrow shorter-term debt relative to focused firms (a single segment firm). Collectively, we hypothesize that diversified firms are more capable and willing to borrow shorter-term debt because they have imperfectly correlated cash flows, higher liquidation assets values and face more agency problems as compared to focused firms. Using a sample of U.S. firms from 1998 to 2011, we provide strong empirical evidence for our main hypothesis. Our core results are robust to a series of robustness checks. However, to our surprise, a further investigation shows that each of the three existing theories (the coinsurance effect, transaction theory and agency costs) alone or individually cannot explain why on average, diversified firms are more likely to borrow shorter-term debt. Overall, our results show that the harder we try to explain why diversified firms borrow shorter-term debt, the more it seems like a puzzle.

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Created: Fri, 21 Dec 2012, 14:18:58 EST by Karen Morgan on behalf of UQ Business School