Working Papers, Hanken School of Economics
With Good Reputation Size Does not Matter: Issue Frequency and the Determinants of Debt Maturity
Abstract: This paper examines empirically the effect firm reputation
has on the determinants of debt maturity. Utilising data from European
primary bond market between 1999 and 2005, I find that the maturity choice
of issuers with a higher reputation is less sensitive to macroeconomic
conditions, market credit risk-premiums, prevailing firm credit quality and
size of the debt issue. The annualised coupon payments are shown to be a
significant factor in determining the debt maturity and reveal a
monotonously increasing relationship between credit quality and debt
maturity once controlled for. Finally, I show that issuers lacking a credit
rating have an implied credit quality positioned between investment-grade
and speculative-grade debt.
Keywords: corporate debt maturity; credit risk; debt seniority; subordination; macroeconomic; reputation; (follow links to similar papers)
33 pages, February 7, 2007
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