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Ryota Nakatani
''Does debt maturity influence productivity?''
( 2023, Vol. 43 No.1 )
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.
Keywords: Debt maturity; Productivity; Financial development; SMEs; Service industry
JEL: G3 - Corporate Finance and Governance: General
D2 - Production and Organizations: General
Manuscript Received : Dec 17 2022 Manuscript Accepted : Mar 30 2023

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