Effect of short-term debt on default risk: Evidence from Pacific Basin countries

Chih Wei Wang, Wan Chien Chiu

研究成果: 雜誌貢獻期刊論文同行評審

19 引文 斯高帕斯(Scopus)

摘要

This study examines the extent to which a firm's short-term debt affects its default probability in five Pacific Basin countries (Australia, South Korea, Malaysia, Singapore, and Taiwan) during 2002–2015. We alleviate concerns about the endogeneity of short-term debt by using long-term debt obligations that matured in the next year. One standard deviation in this measure leads to a significant increase in the default probability within one year by 10%–34%, depending on country. The effect of the rollover risk increasing default probability is stronger in a crisis, for firms experiencing declines in profitability, and under poor credit conditions. Reserving liquidity (i.e., more cash holdings or less financial constraints) acts as a buffer against the rollover risk effect. Overall, our findings support the view that firms that face more difficulty with debt turnover have a higher likelihood of default.

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文章編號101026
期刊Pacific Basin Finance Journal
57
DOIs
出版狀態已出版 - 10月 2019

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