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The corporate debt maturity choice : an empirical examination

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The corporate debt maturity choice : an empirical examination

Sharara-Taher, Lina I. (1994) The corporate debt maturity choice : an empirical examination. Masters thesis, Concordia University.

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Abstract

Unlike the extensive literature on the more general topic of capital structure, empirical research in the corporate debt maturity area is still scant. Related studies had formulated theoretical justifications for the observed cross-sectional multiplicity of debt maturities without a parallel concern in empirical research and to date, little empirical work has been conducted to test those formulations. In this context, this paper makes a major contribution in that it attempts to explain how corporate debt maturity choice is determined. At the core of this study is a general multiple choice model that makes it possible to examine how the different hypotheses on debt maturity advanced thusfar determine that choice. Using an ordered model as opposed to a simple model had the advantage of capturing the segmentation in the debt maturity market while allowing a gain in efficiency for the parameter estimates. The results from this model lend strong support to the hypothesis that, overall, when choosing the maturity of a new debt, corporate managers seek to minimize the agency costs of debt in general, especially those from the incentive for wealth expropriation by investing in riskier projects than originally anticipated. The evidence is also consistent with the assumption that managers do commit themselves not to transfer wealth from bondholders to stockholders by attaching protective covenants to the newly issued debt. Finally, the model's classificatory ability is tested for meaningfulness by comparing it to the proportional chance model.

Divisions:Concordia University > John Molson School of Business
Item Type:Thesis (Masters)
Authors:Sharara-Taher, Lina I.
Pagination:ix, 72 leaves ; 29 cm.
Institution:Concordia University
Degree Name:Theses (M.Sc.Admin.)
Program:Faculty of Commerce and Administration
Date:1994
Thesis Supervisor(s):Jalilvand, A
ID Code:72
Deposited By:Concordia University Libraries
Deposited On:27 Aug 2009 13:09
Last Modified:08 Dec 2010 10:12
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