Corporate debt maturity and future firm performance volatility

Sato, Meg Adachi and Vithessonthi, Chaiporn * (2018) Corporate debt maturity and future firm performance volatility. International Review of Economics and Finance. ISSN 1059-0560 (In Press)

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Abstract

We propose a simple idea that corporate debt maturity should serve as a good indicator of future firm performance volatility. We show in a simple two-period model that the riskiness of corporate investment is a decreasing function of corporate debt maturity. If “observable” corporate debt maturity and ex ante “unobservable” corporate risk-taking is highly correlated, corporate debt maturity should be highly correlated with “ex post” realized firm performance volatility in following years. Using data on firms in 10 developing and developed countries during 1991−2013, we find that corporate debt maturity is negatively associated with future firm operating performance volatility but is not associated with future firm value volatility.

Item Type: Article
Uncontrolled Keywords: debt maturity; firm performance volatility; firm value volatility; investment; risk-taking
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HG Finance
Divisions: Others > Non Sunway Academics
Sunway University > Sunway University Business School > Dept. Economics & Finance
Depositing User: Dr Janaki Sinnasamy
Related URLs:
Date Deposited: 22 Nov 2018 03:33
Last Modified: 13 Jun 2019 05:29
URI: http://eprints.sunway.edu.my/id/eprint/940

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