Asset Liquidity and Debt Structure

• Main Authors: Guan-Ying Huang, 黃冠瑛
• Other Authors: 黃泓人
• Format: Others
• Language: en_US
• Published: 2017
• Online Access: http://ndltd.ncl.edu.tw/handle/ngn82d

博士 === 國立中央大學 === 財務金融學系 === 105 === To investigate the agency problem between manager and debtholder resulted from overhigh asset liquidity under unsecured debt, this study uses five alternative measures of asset liquidity and one composite factor to examine the role of short-term debt. Addressing the joint determination of leverage and debt maturity, we use simultaneous-system-of-equations models instead of ordinary-least-squares regression. The evidence shows that the relation between asset liquidity and leverage is positive, but the significances on debt maturity disappear. Next, the asset liquidity negatively affects leverage under unsecure debt, but the negative effect is mitigated by short-term debt, which indicates that the firm could reduce the agency problem by short-term debt. Finally, this mitigating role of short-term debt is further shown to be more effective during financial crisis and for firms with poor performance because the short-term debt could help debtholder flexibly monitor manager’s behavior, which adding new evidence that short-term debt help resolve the agency conflicts facing unsecured debtholders.