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• This study investigates the impact of debt maturity structure on the marginal value of cash holdings. • We find a positive relationship between the proportion of short-term debt and the marginal value of cash holdings. • The results indicate that frequent interactions with capital markets, driven by short-term debt, act as a monitoring mechanism that enhances transparency and mitigates agency issues. • Further analysis confirms the underlying mechanisms, including financial constraints, managerial moral hazards, and information asymmetry. This study investigates the impact of debt maturity on the marginal value of cash holdings. It posits that short-term debt acts as a crucial governance mechanism by reducing agency conflicts and aligning managerial actions with shareholder interests. Using a sample of U.S. public firms, the results indicate that firms with higher proportions of short-term debt have a greater marginal value of cash, reflecting more efficient resource allocation and reduced managerial opportunism. The necessity for frequent capital market interactions associated with short-term debt mitigates agency conflicts. Additionally, the study explores three potential mechanisms: financial constraints, managerial moral hazard, and information asymmetry. [ABSTRACT FROM AUTHOR]

Highlights • Guided by He and Xiong (2012b) theory, we empirically test the impact of debt market illiquidity on correlated default risk. • Lower debt market liquidity leads to an economically significant increase in the correlated default risk. • Correlation default is more pronounced for short term debt. Abstract We empirically test the theoretical prediction of the impact of debt market liquidity on correlated default risk. Confirming the theory, our results indicate that the lower debt market liquidity, leads to an economically significant increase in the correlated default risk. Also consistent with theory, we show that this effect is more pronounced for short-term debt. [ABSTRACT FROM AUTHOR]

This paper investigates the effect of liquidity on bond risk premium in a model of endogenous debt maturity, in which a firm balances between rollover risk induced by short-term debt and liquidity risk of long-term bonds. Our model generates implications consistent with existing empirical findings. First, bond illiquidity can increase bond risk premium indirectly by increasing the amount of short-term debt and rollover risk, leading to comovement between liquidity risk premium and default risk premium. Second, bond illiquidity has a larger effect for lower-rating bonds. Our model also has new implications that can be tested by further empirical studies. • Bond liquidity risk increases rollover risk through endogenous debt maturity. • Bond liquidity risk increases the bond risk premium both directly and indirectly. • Liquidity and default components in the bond risk premium comove. • The effect of bond liquidity risk on bond risk premium is more pronounced for lower-rating bonds. [ABSTRACT FROM AUTHOR]

We consider an investment option, of which the sunk cost is financed by entering into a fee-for-guarantee swap (FGS) or equity-for-guarantee swap (EGS). Debt has a finite maturity and guarantee costs depend on negotiation. We explicitly derive guarantee costs and the pricing and timing of the option. Under negotiation, borrowers get partial option value depending on his bargaining power and insurers gain the remaining value. We discover that EGSs are better than FGSs in borrowers’ view. Guarantee costs generally increase with funding gaps and investment thresholds decrease with debt maturities. The option value decreases first and then increases with debt maturity. [ABSTRACT FROM AUTHOR]

• We examine the relationship between strategic deviation and debt maturity structure. • Strategic deviation is positively associated with short-term debt. • This relationship is driven by both information asymmetry and corporate governance. • Strategic deviation has important implications for corporate financing decisions. We examine the relationship between strategic deviation and debt maturity structure. Using a large sample of US publicly listed firms from 1981 to 2020, we find that strategic deviation is positively associated with short-term debt. We also find that this relationship is driven by both direct and indirect channels (information asymmetry and corporate governance channels). Our finding remains robust to a series of sensitivity analyses and endogeneity tests. Taken together, we show that strategic deviation has crucial effects on corporate financing decisions. [ABSTRACT FROM AUTHOR]

• We examine US firms using the 2006–2017 sample period and find that entrenched managers choose debt with longer maturity financing to avoid early liquidation. • We detect a possible channel between entrenchment and debt maturity using shareholder-initiated proposals. • Firms with high (low) informational opacity (credit quality) will force entrenched managers to extend their debt maturity. This study investigated the effect of CEO entrenchment on a firm's debt maturity choice. We examine US firms using the 2006–2017 sample period and find that entrenched managers choose debt with longer maturity financing to avoid early liquidation. Additionally, we detect a possible channel between entrenchment and debt maturity using shareholder-initiated proposals. Finally, firms with high (low) informational opacity (credit quality) will force entrenched managers to extend their debt maturity. We provide useful policy implications for shareholders and investors and new insights into CEO entrenchment, debt maturity, and shareholder-initiated proposals. [ABSTRACT FROM AUTHOR]

• We examine the relationship between oil price uncertainty and debt maturity structure. • Oil price uncertainty increases short-term corporate debt. • Result persists for firms operating in oil and most other industries. • Oil price uncertainty has important implications for corporate financing policy. This study examines the relationship between oil price uncertainty and corporate debt maturity structure. Using a large sample of US firm-level data, we find that oil price uncertainty increases short-term corporate debt. We also find that this result persists for firms operating in oil and most other industries. These findings are robust to a battery of tests including the use of alternative measures of oil uncertainty, debt maturity structure, and instrumental variable analysis to address endogeneity concerns. Overall, we provide evidence that oil price uncertainty has important implications for corporate financing policy. [ABSTRACT FROM AUTHOR]

Abstract: A binomial lattice based framework for the analysis of finite investment options with finite operational phase is developed. Numerical results show that optimal leverage ratios are not affected by option moneyness at the investment trigger and leverage ratios are lower when the operational phase is longer. In the case of bonds, where principal payment is due, it is shown that long term debt maturity is optimal and leverage ratios are higher for longer debt horizons. These results are reversed in the case of bank loans with no principal payments. Investment and default triggers in finite horizon and leverage levels along the investment trigger are also investigated. [Copyright &y& Elsevier]

• Financial statement comparability is negatively associated with short-maturity debt. • The negative effect is more pronounced in cases where information asymmetry problems are more severe. • Our findings indicate that financial statement comparability can substitute for the use of short-term debt by serving as a corporate governance mechanism. This paper examines the relation between financial statement comparability and corporate debt maturity. We provide robust evidence that comparability has a negative effect on short-maturity debt. Consistent with the notion that comparability of financial statements plays an important role in aligning incentives within the firm, the inverse effect is more pronounced in cases where information asymmetry problems are more severe. Overall, our findings indicate that financial statement comparability can substitute for the use of short-term debt by serving as a corporate governance mechanism. [ABSTRACT FROM AUTHOR]

• We construct a model that endogenizes both the debt maturity choices of financial institutions and the liquidity of the asset market. • The decrease in asset quality can cause over-reliance on short-term debt and also lower market liquidity at the same time. • The result provides a new mechanism of market freeze. • The result sheds light on unifiedy understanding the maturity mismatch and liquidity dry-ups of the asset market during the recent global financial crisis. We construct a model that endogenizes both the debt maturity choices of financial institutions and the liquidity of the asset market in a Rational Expectations Equilibrium. And we find that the decrease in asset quality can cause over-reliance on short-term debt and also lower market liquidity at the same time. Our result provides a new mechanism of market freeze and sheds light on unifiedy understanding the maturity mismatch and liquidity dry-ups of the asset market during the recent global financial crisis. [ABSTRACT FROM AUTHOR]