IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-22-00857.html
   My bibliography  Save this article

Does debt maturity influence productivity?

Author

Listed:
  • Ryota Nakatani

    (International Monetary Fund)

Abstract

Using firm-level data for seven European and Asian countries over a span of 20 years, this study investigates whether debt maturity influences productivity. Long-term debt is associated with lower productivity for small and medium-sized enterprises (SMEs), whereas larger firms succeed in using long-term financing for productivity improvement. Conversely, short-term debt is also associated with higher productivity. These results can be explained by (i) the moral hazard effects of long-term debt stemming from the less intense monitoring of firm performance and fewer liquidation fears, and (ii) the disciplinary effects of short-term debt to improve short-term performance, such as facilitating access to more productive technologies. As the financial market develops, the positive disciplinary effects of short-term debt on productivity weaken, whereas the negative moral hazard effects of long-term debt dissipate.

Suggested Citation

  • Ryota Nakatani, 2023. "Does debt maturity influence productivity?," Economics Bulletin, AccessEcon, vol. 43(1), pages 116-136.
    • Handle: RePEc:ebl:ecbull:eb-22-00857
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2023/Volume43/EB-23-V43-I1-P12.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nakatani, Ryota, 2021. "Total factor productivity enablers in the ICT industry: A cross-country firm-level analysis," Telecommunications Policy, Elsevier, vol. 45(9).
    2. Nakatani, Ryota, 2022. "Productivity drivers of infrastructure companies: network industries to maximize economies of scale in the digital era," MPRA Paper 115531, University Library of Munich, Germany.
    3. Michele Battisti & Filippo Belloc & Massimo Del Gatto, 2015. "Unbundling Technology Adoption and tfp at the Firm Level: Do Intangibles Matter?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(2), pages 390-414, June.
    4. Lilas Demmou & Guido Franco & Irina Stefanescu, 2020. "Productivity and finance: the intangible assets channel - a firm level analysis," OECD Economics Department Working Papers 1596, OECD Publishing.
    5. Balázs Égert, 2016. "Regulation, Institutions, and Productivity: New Macroeconomic Evidence from OECD Countries," American Economic Review, American Economic Association, vol. 106(5), pages 109-113, May.
    6. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    7. Ryota Nakatani, 2023. "Productivity drivers of infrastructure companies: Network industries utilizing economies of scale in the digital era," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 94(4), pages 1273-1298, December.
    8. Carol Corrado & Chiara Criscuolo & Jonathan Haskel & Alexander Himbert & Cecilia Jona-Lasinio, 2021. "New evidence on intangibles, diffusion and productivity," OECD Science, Technology and Industry Working Papers 2021/10, OECD Publishing.
    9. Edward I. Altman & Marco Balzano & Alessandro Giannozzi & Stjepan Srhoj, 2023. "Revisiting SME default predictors: The Omega Score," Journal of Small Business Management, Taylor & Francis Journals, vol. 61(6), pages 2383-2417, November.
    10. Daniel A. Ackerberg & Kevin Caves & Garth Frazer, 2015. "Identification Properties of Recent Production Function Estimators," Econometrica, Econometric Society, vol. 83, pages 2411-2451, November.
    11. Mattia Di Ubaldo & Iulia Siedschlag, 2021. "Investment in Knowledge‐Based Capital and Productivity: Firm‐Level Evidence from a Small Open Economy," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(2), pages 363-393, June.
    12. Léon, Florian, 2020. "The provision of long-term credit and firm growth in developing countries," Economic Modelling, Elsevier, vol. 90(C), pages 66-78.
    13. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 317-341.
    14. Ondřej Dvouletý & Stjepan Srhoj & Smaranda Pantea, 2021. "Public SME grants and firm performance in European Union: A systematic review of empirical evidence," Small Business Economics, Springer, vol. 57(1), pages 243-263, June.
    15. Chauvet, Lisa & Ehrhart, Hélène, 2018. "Aid and growth: evidence from firm-level data," Journal of Development Economics, Elsevier, vol. 135(C), pages 461-477.
    16. Lilas Demmou & Guido Franco, 2021. "Mind the financing gap: Enhancing the contribution of intangible assets to productivity," OECD Economics Department Working Papers 1681, OECD Publishing.
    17. Tajika, Eiji & 田近, 栄治 & Nakatani, Ryota & 中谷, 亮太, 2008. "Welcome Home to Japan: Repatriation of Foreign Profits by Japanese Multinationals," Discussion Papers 2008-04, Graduate School of Economics, Hitotsubashi University.
    18. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    19. Rajan, Raghuram G & Zingales, Luigi, 1995. "What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-1460, December.
    20. Nathan Chappell & Adam Jaffe, 2018. "Intangible Investment and Firm Performance," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(4), pages 509-559, June.
    21. Hart, Oliver & Moore, John, 1995. "Debt and Seniority: An Analysis of the Role of Hard Claims in Constraining Management," American Economic Review, American Economic Association, vol. 85(3), pages 567-585, June.
    22. Douglas W. Diamond, 1991. "Debt Maturity Structure and Liquidity Risk," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(3), pages 709-737.
    23. Jaramillo, Fidel & Schiantarelli, Fabio, 1997. "Access to long term debt and effects of firm's performance : lessons from Ecudaor," Policy Research Working Paper Series 1725, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ryota Nakatani, 2023. "Sovereign Debt Crisis and Fiscal Devolution," JRFM, MDPI, vol. 17(1), pages 1-9, December.
    2. Ryota Nakatani, 2024. "Multifactor productivity growth enhancers across industries and countries: firm-level evidence," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 14(2), pages 401-446, June.
    3. Nakatani, Ryota, 2023. "Debt maturity and firm productivity—The role of intangibles," Research in Economics, Elsevier, vol. 77(1), pages 116-121.
    4. Ryota Nakatani, 2024. "Food companies' productivity dynamics: Exploring the role of intangible assets," Agribusiness, John Wiley & Sons, Ltd., vol. 40(1), pages 185-226, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nakatani, Ryota, 2023. "Debt maturity and firm productivity—The role of intangibles," Research in Economics, Elsevier, vol. 77(1), pages 116-121.
    2. Ryota Nakatani, 2024. "Food companies' productivity dynamics: Exploring the role of intangible assets," Agribusiness, John Wiley & Sons, Ltd., vol. 40(1), pages 185-226, January.
    3. Sommer, Christoph, 2021. "The impact of patient capital on job quality, investments and firm performance: Cross-country evidence on long-term finance," IDOS Discussion Papers 6/2021, German Institute of Development and Sustainability (IDOS).
    4. Ryota Nakatani, 2024. "Multifactor productivity growth enhancers across industries and countries: firm-level evidence," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 14(2), pages 401-446, June.
    5. Harvey, Campbell R. & Lins, Karl V. & Roper, Andrew H., 2004. "The effect of capital structure when expected agency costs are extreme," Journal of Financial Economics, Elsevier, vol. 74(1), pages 3-30, October.
    6. Roth, Felix & Sen, Ali & Rammer, Christian, 2021. "Intangible Capital and Firm-Level Productivity – Evidence from Germany," Hamburg Discussion Papers in International Economics 9, University of Hamburg, Department of Economics.
    7. Maximilian Todtenhaupt & Johannes Voget, 2021. "International Taxation and Productivity Effects of M&As," CESifo Working Paper Series 8967, CESifo.
    8. Cristiano Antonelli & Gianluca Orsatti & Guido Pialli, 2023. "The effects of the limited exhaustibility of knowledge on firm size and the direction of technological change," The Journal of Technology Transfer, Springer, vol. 48(4), pages 1359-1385, August.
    9. Chen, Minjia & Matousek, Roman, 2020. "Do productive firms get external finance? Evidence from Chinese listed manufacturing firms," International Review of Financial Analysis, Elsevier, vol. 67(C).
    10. Yu, Degan & Wang, Cong & Cai, Guilong & Qiang, Haofan, 2024. "Local gambling attitudes and firms' financing strategies: New insights from the geographic structure in China," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
    11. Todtenhaupt, Maximilian & Voget, Johannes, 2021. "International taxation and productivity effects of M&As," Journal of International Economics, Elsevier, vol. 131(C).
    12. Shoaib Ali & Attiya Yasmin Javid, 2015. "Relationship between Credit Rating, Capital Structure and Earning Management Behaviour: Evidence from Pakistani Listed Firms," PIDE-Working Papers 2015:121, Pakistan Institute of Development Economics.
    13. Shleifer, Andrei & Vishny, Robert W, 1997. "A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    14. Orman, Cüneyt & Bülent, Köksal, 2015. "Structure of Debt Maturity across the Firm Type Spectrum," MPRA Paper 64860, University Library of Munich, Germany.
    15. Oliver Hart, 2001. "Financial Contracting," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1079-1100, December.
    16. Canarella, Giorgio & Miller, Stephen M., 2022. "Firm size, corporate debt, R&D activity, and agency costs: Exploring dynamic and non-linear effects," The Journal of Economic Asymmetries, Elsevier, vol. 25(C).
    17. Christoph Sommer, 2024. "The Impact of Long-Term Finance on Job Quality, Investments and Firm Performance: Cross-Country Evidence," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 36(4), pages 747-776, August.
    18. Paligorova, Teodora & Xu, Zhaoxia, 2012. "Complex ownership and capital structure," Journal of Corporate Finance, Elsevier, vol. 18(4), pages 701-716.
    19. Schiantarelli, Fabio & Sembenelli, Alessandro, 1997. "The maturity structure of debt : determinants and effects on firms'performance - evidence from the United Kingdom and Italy," Policy Research Working Paper Series 1699, The World Bank.
    20. Debora Revoltella, 2001. "Financing Enterprises in the Czech Republic: Debt and Firm-specific Variables," Economic Change and Restructuring, Springer, vol. 34(3), pages 231-246, October.

    More about this item

    Keywords

    Debt maturity; Productivity; Financial development; SMEs; Service industry;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • D2 - Microeconomics - - Production and Organizations

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-22-00857. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.