ARE LEVERAGE AND DEBT MATURITY COMPLEMENTS OR SUBSTITUTES? EVIDENCE FROM LATIN AMERICA

Authors

  • Paulo Renato Soares Terra Universidade Federal do Rio Grande do Sul

Keywords:

Capital structure, Debt maturity, Trade-off, Dynamic panel data analysis, Latin America.

Abstract

The aim of this paper is to investigate the choice between debt and equity simultaneously with the decision between short- and long-term debt for a large sample of emerging markets from Latin America. In order to do this, we test a model (BARCLAY; MARX; SMITH JR., 2003) of joint capital structure and debt maturity determination for a sample of 986 firms from Latin America in the period 1990-2002, employing the Generalized Method of Moments on a system of equations. The empirical results support three main findings. First, capital structure and debt maturity are financial policy complements in Latin America. Second, there is a substantial dynamic component in the determination of debt maturity that has been neglected by previous research. Finally, firms face moderate adjustment costs towards their optimal maturity. Results are robust to variation in sample composition in terms or countries, industries, and years.

Downloads

Download data is not yet available.

Author Biography

Paulo Renato Soares Terra, Universidade Federal do Rio Grande do Sul

Doutor em Administração, McGill University, Canadá. Professor adjunto de Finanças do Programa de Pós-Graduação em Administração da Universidade Federal do Rio Grande do Sul (UFRGS)

Downloads

Additional Files

Published

2009-10-23

Issue

Vol. 10 No. 6 (2009): Thematic Special Editon - Golden Jubilee of Modigliani & Miller

Section

Golden Jubilee of Modigliani & Miller

License

Once the papers have been approved, the authors will assign their copyrights to this Journal.  The Copyright Assignment Conditions include:

1.  The Mackenzie Administration Journal holds the rights to all the papers published therein through assignment of copyright. 

2.  The author retains moral rights to the paper, including the right to identify the author whenever the article is published.

3. As of July 1, 2015 RAM adopted the CC-BY license standard (Creative Commons– BY). Authors are allowed to copy, distribute, display, transmit and adapt articles. Authors must attribute to RAM explicitly and clearly an article’s original publication (with reference to the journal’s name, edition, year and pages in which the article was originally published), yet without suggesting that RAM endorses the author or its use of the article. Contents are released by means of the CC-BY license to fully inter-operate with a variety of different systems and services, including for commercial purposes. In case of an article’s reuse or distribution, authors must make the article’s licensing terms clear to third parties. CC-BY criteria follow open access policies by major OA (Open Access) publishers and journals, such as PLoS, eLife, Biomed Central and Hindawi, among others.

4.  When formally requested by the author, this Journal may allow the paper to be published as a chapter or part of a book.  The only requirement is that prior publication in this Journal (Journal name, issue, year and pages) must be clearly and explicitly shown as a reference.