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Short-term debt catering

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  • Lugo, Stefano

Abstract

Focusing on investments by US money market mutual funds (MMFs) in nonfinancial commercial paper, this study shows that the demand for corporate short-term securities by preferred-habitat investors is positively associated with the use of short-term debt by firms. Consistent results are found when using a longitudinal dataset with a monthly frequency and a firm-quarter panel dataset; instrumenting the demand by MMFs; measuring the demand by MMFs at the level of individual issuers; and exploiting an exogenous change in regulation for identification. These findings support the idea that corporations cater to investors' preferences in choosing their debt maturity structure.

Suggested Citation

  • Lugo, Stefano, 2021. "Short-term debt catering," Journal of Corporate Finance, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:corfin:v:66:y:2021:i:c:s0929119920302613
    DOI: 10.1016/j.jcorpfin.2020.101817
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    References listed on IDEAS

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    Cited by:

    1. Chao, Ching-Hsiang & Huang, Chih-Jen & Ho, Ruey-Jenn & Huang, Hsin-Yi, 2022. "Catering to investors through capital expenditures: Testing assets substitution problem around financing," The North American Journal of Economics and Finance, Elsevier, vol. 59(C).
    2. Lugo, Stefano, 2023. "Cost of monitoring and risk taking in the money market funds industry," Journal of Financial Intermediation, Elsevier, vol. 53(C).
    3. 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).
    4. Valère Fourel & Alice Schwenninger, 2024. "The Impact of the PEPP on the Corporate Commercial Paper Market," Working papers 946, Banque de France.

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    More about this item

    Keywords

    Debt maturity; Catering to investors; Clientele effects; Money market mutual funds; Commercial paper;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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