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On the Signalling Role of Debt Maturity
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Robert Lensink
Published/Copyright:
December 4, 2006
This paper focuses on the signalling role of debt maturity. The main novelty of the paper is that it analyzes a setting in which high quality firms use collateral as a complementary device along with debt maturity to signal their superiority. Model simulations suggest a non-monotonic relationship between firm quality and debt maturity, in which high quality firms have both long-term secured debt and short-term secured or non-secured debt and low quality firms have long-term unsecured debt. We provide some empirical evidence for this result based on debt contracts of the Asia Commercial Bank.
Published Online: 2006-12-4
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Keywords for this article
debt maturity;
asymmetric information;
signalling;
collateral
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- Contributions Article
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