Corporate debt maturity and stock price crash risk

Viet Dang, Edward Lee, Yangke Liu, Cheng Zeng

Research output: Contribution to journalArticle

9 Citations (Scopus)

Abstract

We find that firms with a larger proportion of short‐term debt have lower future stock price crash risk, consistent with short‐term debt lenders playing an effective monitoring role in constraining managers’ bad‐news‐hoarding behaviour. The inverse relationship between short‐maturity debt and future crash risk is more pronounced for firms that are harder to monitor due to weaker corporate governance, higher information asymmetry, and greater risk‐taking. These findings suggest that short‐term debt substitutes for other monitoring mechanisms in curbing managerial opportunism and reducing future crash risk. Our study implies that short‐maturity debt not only preserves creditors’ interests, but also protects shareholders’ wealth.
Original languageEnglish
Pages (from-to)451-484
Number of pages33
JournalEuropean Financial Management
Volume24
Issue number3
Early online date07 Sep 2017
DOIs
Publication statusPublished - 13 Jun 2018
EventEuropean Financial Management Association - University of Basel, Basel, Switzerland
Duration: 29 Jun 201602 Jul 2016
https://www.efmaefm.org

Fingerprint Dive into the research topics of 'Corporate debt maturity and stock price crash risk'. Together they form a unique fingerprint.

  • Cite this