Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 125: Corporate Debt Maturity Choice in Transition Financial Markets

Andreas Stephan (), Oleksandr Talavera and Andriy Tsapin
Additional contact information
Andreas Stephan: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Oleksandr Talavera: Aberdeen Business School
Andriy Tsapin: European University Viadrina

Abstract: This paper investigates the determinants of liability maturity choice in transition markets. We formulate a model of ¯rm value maximization that describes managers' choice of optimal debt structure. The theoretical predictions are tested using a unique panel of 4,300 Ukrainian firms during the period 2000-2005. Our estimates confirm the importance of liquidity, signaling, maturity matching, and agency costs for the liability term structure of firm operating in a transition economy. In addition, we find that companies do not react uniformly to determinants of debt maturity. Firms that mainly rely on external funds are sensitive to signaling and they consider the variability of firm value an important determinant of their debt maturity choice. For less constrained companies that rely more on internal funding, asset maturity is an essential determinant of debt structure.

Keywords: debt maturity; capital structure; transition period; Ukraine

JEL-codes: D24; G30; G32

37 pages, April 2, 2008

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