The Maturity Structure of Private Placements of Debt

Abstract

We examine the maturity structure in private placements of debt and relate it to contracting, signaling, tax, and liquidity risk considerations for firms. We find that firms with higher tax rates issue private placements of debt with longer maturities, consistent with the tax hypothesis. However, our results do not support the contracting, signaling, and liquidity risk hypotheses. In addition, the results are confined to the smaller firms in the sample, firms without a public debt rating, and debt issues not pursuant to Rule 144A. The evidence is consistent with smaller firms issuing private placements of debt to avoid monopoly rent extraction from banks.

Citation

Dennis, S.A., Zhang, Y. and Wang, S. (2017), "The Maturity Structure of Private Placements of Debt", Growing Presence of Real Options in Global Financial Markets (Research in Finance, Vol. 33), Emerald Publishing Limited, Leeds, pp. 159-180. https://doi.org/10.1108/S0196-382120170000033008