The Research On The Impact Of Debt Maturity Structure On Investment Behavior

How a firm's level of debt and the maturity structure of the debt affect its investment decisions are fundamental issues in corporate finance. In a Miller-Modigliani world with complete markets, a firm's financial policy including the maturity of its debt has no bearing on its investment decisions. In a world with incomplete markets, however, agency problems inherent in interactions between shareholders, debt holders, and management, and associated with the level of leverage and its maturity composition, give rise to underinvestment or overinvestment incentives. Generally speaking, the reasons of debt maturity structure fluctuating the scale of investment of the company are: (1)shortening the debt maturity can reduce insufficient investment which is leaded by the conflict between shareholders and creditors;(2)shortening the debt maturity can restrain the excessive investment which is leaded by the conflict between shareholders and managers;(3)long debt are more important than short debt in the impact of asset substitution .the relation between debt maturity and investment maybe negative or positive ,this is depend on which theory is most important one .This paper is about the results of an empirical study on how debt maturity structure is related to listed manufacturing firms' fixed-asset investment behavior on 1999—2004 data, we make up a fixed effect panel data model, which has several control variables such as capital structure, cash flow ratio and growth opportunities .the main findings of this paper are as follows:(l)in general, there is a significantly negative relation between debt maturity structure and firms' investment.(2) when divide the sample into two groups based on the growth opportunities, we find after controlling for the effect of the overall level of leverage, that a higher percentage of long-term debt in total debt significantly reduces investment for firms with high growth opportunities. In contrast, the correlation between debt maturity and investment is not significant for firms with low growth opportunities.(3) when divide the sample into two groups based on the state stake ratio, we find this negative relation between debt maturity structure and firms' investment holds for firms with low state stake ratio, but not for great state stake ratio firms. (4) Systematic differences may exist in the investment behavior of firms in different industries. To control for industry effects and to test the robustness of the results, we transform all the variables into deviation-from-industry mean and perform the same exercise. The estimation of the investment equation using industry-adjusted variables yields similar results .(5) These results hold even after controllingfor the endogenous problem inherent in the relationship between total leverage, the maturity composition of leverage, and investment.