The authors provide an empirical examination of the determinants of corporate debt maturity. Their evidence offers strong support for the contracting-cost hypothesis. Firms that have few growth options, are large, or are regulated have more long-term debt in their capital structure. The authors find little evidence that firms use the maturity structure of their debt to signal information to the market. The evidence is consistent, however, with the hypothesis that firms with larger information asymmetries issue more short-term debt. The authors find no evidence that taxes affect debt maturity. Copyright 1995 by American Finance Association.
Published in 1995.