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With good reputation size does not matter: issue frequency and the determinants of debt maturity

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  • Nikolas Rokkanen

Abstract

This article examines empirically the effect firm reputation has on the determinants of debt maturity. Utilizing data from European primary bond market between 1999 and 2005, I find that reputation is a determinant of the maturity of newly issued debt, where firms of high or low reputation issue short-term debt and firms of mediocre reputation issue long-term debt. Thus, reputation appears to mimic a nonmonotonic relationship between credit quality and maturity. The annualized coupon payments are shown to be a significant factor in determining the debt maturity and reveal a monotonously increasing relationship between credit quality and debt maturity once controlled for. Finally, I show that issuers lacking a credit rating have an implied credit quality positioned between Investment Grade (IG) and Speculative Grade (SG) debt.

Suggested Citation

  • Nikolas Rokkanen, 2010. "With good reputation size does not matter: issue frequency and the determinants of debt maturity," Applied Financial Economics, Taylor & Francis Journals, vol. 20(9), pages 701-718.
    • Handle: RePEc:taf:apfiec:v:20:y:2010:i:9:p:701-718
    DOI: 10.1080/09603100903493229
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    Cited by:

    1. Onur Kemal Tosun & Lemma W. Senbet, 2020. "Does internal board monitoring affect debt maturity?," Review of Quantitative Finance and Accounting, Springer, vol. 54(1), pages 205-245, January.

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