Firm-specific influences on liability maturity structure

The repayment schedule is a fundamental characteristic of a debt security which, along with such items as amount and rate, must be specified in order to completely define the security. The levered firm's overall liability maturity structure represents these repayment plans collectively. This research addressed the influence of firm-level factors on observed liability maturity structures.

The literature in finance suggests maturity structure roles for certain attributes of the income stream of the firm, as well as the assets generating the income. However, there are few empirical tests of the liability maturity structure matter in general, only one of which is cross-sectional in focus. Therefore, the research involved measurement and tests of the theoretically derived influences bearing on the maturity decision, including asset growth, expected lives of assets, variability of income, covariability of income with interest rates, and the proportion of assets financed with debt. The liabili ty maturity structures of the sampled firms were directly obtained with the duration measure.

The regression results indicate statistical significance of asset lives, asset growth, and the extent of debt capital financing, thereby supporting maturity structure relevance of the habitat theory, principal-agent relationships, and the interplay of amount with maturity of debt. The risk reduction role of income-interest rate patterns is unclear and dependent upon variable measurement alter natives. The variability of firm income, viewed as a risk measure, was not statistically significant. The research demonstrates that liability maturity structures are established in recognition of identifiable characteristics of firms.