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The Relation between Corporate and Government Debt Maturity in Europe

Author

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  • Lugo, Stefano
  • Piccillo, Giulia

Abstract

This article investigates the gap-filling explanation for corporate debt maturity choices in a multi-country setting. We argue that companies adjust their debt maturity in response to shocks in government debt maturity both at home and abroad; the difference between the two effects depends on the markets’ relative size and level of integration. Focusing on the European case and treating the Economic and Monetary Union as a shock in market integration, we find strong empirical support for our predictions. Our results have relevant implications for the opportunity for individual governments to use their debt maturity structure as a policy tool.

Suggested Citation

  • Lugo, Stefano & Piccillo, Giulia, 2019. "The Relation between Corporate and Government Debt Maturity in Europe," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 54(5), pages 2119-2140, October.
    • Handle: RePEc:cup:jfinqa:v:54:y:2019:i:05:p:2119-2140_00
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    Citations

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    Cited by:

    1. Lugo, Stefano, 2021. "Short-term debt catering," Journal of Corporate Finance, Elsevier, vol. 66(C).
    2. Wolswijk, Guido, 2020. "Drivers of European public debt management," Working Paper Series 2437, European Central Bank.
    3. Chen, Suyun & Li, Zongze & Xie, Feixue & Xu, Xiaofang, 2024. "The signaling effect of local government debt: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 95(PA).
    4. Atawnah, Nader & Zaman, Rashid & Liu, Jia & Atawna, Thaer & Maghyereh, Aktham, 2023. "Does foreign competition affect corporate debt maturity structure? Evidence from import penetration," International Review of Financial Analysis, Elsevier, vol. 86(C).
    5. Ben-Nasr, Hamdi & Boubaker, Sabri, 2024. "Government debt and stock price crash risk: International Evidence," Journal of Financial Stability, Elsevier, vol. 72(C).
    6. Zhang, Man & Brookins, Oscar T. & Huang, Xiaowei, 2022. "The crowding out effect of central versus local government debt: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 72(C).
    7. Hamdi Ben-Nasr & Sabri Boubaker, 2024. "Government debt and stock price crash risk: International Evidence," Post-Print hal-04648524, HAL.
    8. Yang, Yang & Chen, Wanying & Yu, Zhuangxiong, 2023. "Local government debt and corporate digital transformation: Evidence from China," Finance Research Letters, Elsevier, vol. 57(C).
    9. Hussain Rana Yassir & Xuezhou Wen & Hussain Haroon & Ahmad Ilyas & Irshad Hira & Malik Muhammad Yasir Hayat, 2024. "Firm Attributes and Government External Debt as Determinants of Corporate Short Debt Maturity in a Post-CPEC Scenario," Zagreb International Review of Economics and Business, Sciendo, vol. 27(1), pages 137-154.
    10. Wu, Julia Yonghua & Opare, Solomon & Bhuiyan, Md. Borhan Uddin & Habib, Ahsan, 2022. "Determinants and consequences of debt maturity structure: A systematic review of the international literature," International Review of Financial Analysis, Elsevier, vol. 84(C).
    11. Peng, Pin & Lin, Gaoyi, 2024. "Local government debt and corporate tax avoidance: Evidence from China," Finance Research Letters, Elsevier, vol. 59(C).
    12. Mark J. Flannery & Claire Yurong Hong & Baolian Wang, 2023. "The Effect of Government Reference Bonds on Corporate Borrowing Costs: Evidence from a Natural Experiment," Management Science, INFORMS, vol. 69(7), pages 4051-4077, July.

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